Core Insights - Leidos Holdings, Inc. is a technology and engineering firm focused on national security, defense, health, and civil markets, with a market capitalization of approximately $23.8 billion [1] Stock Performance - LDOS shares have outperformed the broader market, gaining 13.2% over the past 52 weeks and 29.5% year-to-date, compared to the S&P 500 Index's gains of 11% and 12.3% respectively [2] - While LDOS has lagged behind the Technology Select Sector SPDR Fund's 17% surge over the past year, it has outpaced XLK's 17.5% increase in 2025 [3] Financial Performance - The company reported record revenues of $4.5 billion for the third quarter, reflecting a 7% year-over-year increase, with non-GAAP EPS of $3.05, up 4% annually [4] - Leidos' total backlog increased by 5% year-over-year, indicating strong demand for its services [4] Strategic Initiatives - The "NorthStar 2030" strategy is focused on growth areas such as national security, mission software, and health services, benefiting from favorable macroeconomic conditions [5] - Analysts project a 14.8% year-over-year growth in EPS for fiscal 2025, expecting it to reach $11.72 [5] Analyst Ratings - The stock has a consensus "Moderate Buy" rating, with 15 analysts covering it: eight recommend "Strong Buy," one "Moderate Buy," and six suggest a "Hold" rating [6] - Jefferies recently raised its price target for LDOS to $230 from $215, maintaining a "Buy" rating after a strong quarterly performance [7]

Group 1 - Vista Corp has experienced a 25% pullback over the last few months, but remains an overweight position due to strong growth opportunities in the data center sector and energy bottlenecks in the ecosystem [1] - Lidos is positioned well to benefit from opportunities identified by the Department of War, indicating a favorable market environment for the company [2] - Walmart reported impressive earnings with expanding e-commerce and a growing membership model, alongside strong forward guidance from management [3] Group 2 - Zoom is expected to report a revenue increase of 3.1% and earnings growth of 4.1% on Monday, with any results exceeding these expectations likely to positively impact the stock [3]

Core Points - The company will host a live audio webcast on December 3, 2025, from 12:10 p.m. to 12:45 p.m. [1]

Core Insights - Starlab is positioned as the leading contender to replace the International Space Station (ISS), which is set for disposal after 2030, with significant international support and a strong coalition of partners [2][10] Company Overview - Starlab is led by Voyager Technologies and includes partners such as Hilton Worldwide, Northrop Grumman, Palantir, MDA Space, Airbus, and Mitsubishi, showcasing a diverse and robust coalition [3][4] - Recently, Leidos joined the Starlab team, bringing extensive experience in civil space and defense integration, which will enhance Starlab's capabilities in assembling and integrating the space station [4] Financial Backing - The coalition supporting Starlab boasts a total market capitalization of approximately $890.9 billion and annual revenue of about $250.5 billion, indicating substantial financial resources [7] - Key partners include: - Voyager Space: Market Cap $1.4 billion, Revenue $158 million - MDA Space: Market Cap $2.1 billion, Revenue $965 million - Hilton Worldwide: Market Cap $63.8 billion, Revenue $4.9 billion - Northrop Grumman: Market Cap $80.3 billion, Revenue $40.9 billion - Mitsubishi Corporation: Market Cap $89.3 billion, Revenue $116.3 billion - Airbus: Market Cap $192.5 billion, Revenue $83.4 billion - Palantir Technologies: Market Cap $461.5 billion, Revenue $3.9 billion [7] Competitive Landscape - Starlab faces competition from other coalitions, including Blue Origin's Orbital Reef, which is financially supported by Jeff Bezos but currently unprofitable [6][8] - Starlab's financial strength and broad coalition make it a strong candidate to secure NASA contracts and complete the next ISS [9][10]

Core Insights - Leidos (LDOS) stock has increased by over 33% since June, marking it as one of the best investment ideas for the year [1] Company Performance - The third quarter performance of Leidos has been highlighted, indicating strong growth and positive market reception [1]

Core Insights - Leidos (LDOS) stock has increased by over 33% since June, marking it as one of the best investment ideas for the year [1] Company Performance - The third quarter performance of Leidos has been highlighted, indicating strong growth and positive market reception [1]

Core Viewpoint - The stock of Leos has reached a record high following a strong earnings report, with both top and bottom line beats, and an increase in full-year guidance [1][4]. Company Performance - Leos reported earnings of $35 per share, a 7% increase compared to the estimated $2.68, and an increase from last year's earnings of $2.93 [4]. - Sales rose by 7.1% to $4.5 billion, up from $4.41 billion [4]. - The company raised its dividend from $0.40 to $0.43, indicating confidence in future progress [5]. Market Context - There is a notable influx of capital into the defense sector, particularly benefiting companies like Leos that focus on software and cybersecurity [1][2]. - Approximately 87% of Leos' sales are derived from the Department of Defense, NASA, and AFAA, highlighting its strong government ties [2]. Industry Dynamics - The defense sector is experiencing a divergence between hardware-based contractors and those focused on consulting services, with companies like Leos positioned uniquely due to their proprietary technology [8][9]. - The recovery of technologically innovative companies in the defense sector is evident, as they begin to catch up after earlier setbacks due to budget cutbacks [3][10]. Analyst Insights - Analysts note an improvement in cash flow for Leos and suggest that concerns regarding defense contractor cutbacks were overstated, indicating a resumption of positive trends for the company [11].

Core Insights - Leidos Holdings, Inc. (LDOS) reported third-quarter 2025 adjusted earnings of $3.05 per share, exceeding the Zacks Consensus Estimate of $2.61 by 16.9% and improving 4.1% from $2.93 in the prior-year quarter [1] - Total revenues reached $4.47 billion, surpassing the Zacks Consensus Estimate of $4.27 billion by 4.8% and reflecting a year-over-year growth of 6.7% driven by increased demand across all customer segments, particularly in Defense Systems [2] - The company’s total backlog increased to $47.66 billion from $45.51 billion at the end of the first quarter of 2025, with $9.06 billion of this amount being funded [3] Financial Performance - The cost of revenues rose 6.4% year over year to $3.65 billion, while adjusted operating income improved to $535 million from $516 million in the year-ago quarter [4] - Interest expenses increased to $51 million from $46 million in the previous year [4] - Cash and cash equivalents totaled $974 million as of October 3, 2025, compared to $849 million as of January 3, 2025, while long-term debt rose to $4.63 billion from $4.05 billion [9] Segment Performance - National Security and Digital segment revenues increased 8% year over year to $2.02 billion, with adjusted operating income rising to $191 million [5] - Health & Civil segment revenues reached $1.30 billion, up 6.2% year over year, with adjusted operating income totaling $328 million [6] - Commercial & International segment revenues decreased by 1.2% to $571 million, while Defense Systems segment revenues increased by 11.5% to $582 million [7][8] Guidance - Leidos has raised its 2025 adjusted earnings guidance to a range of $11.45-$11.75 per share, up from the previous projection of $10.15-$10.45, with the Zacks Consensus Estimate for earnings at $11.41 per share [10] - The revenue outlook for 2025 remains steady at $17.00-$17.25 billion, with the Zacks Consensus Estimate for revenues at $17.15 billion [11]

Financial Performance - Revenues for the three months ended October 3, 2025, were $4,469 million, a 6.7% increase from $4,190 million for the same period in 2024[8] - Operating income for the three months ended October 3, 2025, was $535 million, compared to $516 million for the same period in 2024, reflecting a 3.7% increase[8] - Net income attributable to Leidos common stockholders for the three months ended October 3, 2025, was $367 million, up from $364 million in the same period of 2024, representing a 0.8% increase[8] - Earnings per share (EPS) for the three months ended October 3, 2025, were $2.87 (basic) and $2.82 (diluted), compared to $2.72 and $2.68, respectively, for the same period in 2024[8] - Total revenue for the three months ended October 3, 2025, was $4.449 billion, compared to $4.169 billion for the three months ended September 27, 2024, reflecting an increase of 6.7%[41] - Total revenues for the three months ended October 3, 2025, were $4,469 million, an increase from $4,190 million in the same period last year, representing a growth of 6.7%[81] - For the nine months ended October 3, 2025, total revenues reached $12,967 million, up from $12,297 million in the prior year, marking a year-over-year increase of 5.4%[82] - Total revenue for the nine months ended October 3, 2025, was $12,910 million, an increase from $12,227 million for the same period in 2024, representing a growth of 5.6%[43] Expenses and Costs - The company reported a total cost of revenues of $3,648 million for the three months ended October 3, 2025, compared to $3,428 million for the same period in 2024, indicating a 6.4% increase[8] - Selling, general and administrative expenses for the three months ended October 3, 2025, were $286 million, an increase of 15.8% from $247 million in the same period of 2024[8] - The company incurred acquisition, integration, and restructuring costs of $4 million for the three months ended October 3, 2025, compared to $3 million in the same period of 2024[8] - Interest expense for the three months ended October 3, 2025, was $51 million, compared to $46 million for the same period in 2024, reflecting an increase of 10.9%[8] - Direct labor costs for the three months ended October 3, 2025, amounted to $968 million, compared to $921 million for the same period last year, reflecting an increase of 5.1%[81] - The Corporate expense for the three months ended October 3, 2025, was $59 million, compared to $36 million in the same period last year, indicating a significant rise of 63.9%[82] Income and Cash Flow - Net income for the nine months ended October 3, 2025, was $1,127 million, an increase from $969 million for the same period in 2024, representing a growth of approximately 16.3%[16] - Cash flows from operating activities provided $1,255 million, compared to $1,141 million in the prior year, indicating an increase of about 10%[16] - The company reported a net increase in cash, cash equivalents, and restricted cash of $106 million for the nine months ended October 3, 2025[16] Assets and Liabilities - Total cash and cash equivalents at the end of the period was $974 million, down from $1,097 million at the end of September 27, 2024[16] - Contract assets increased to $949 million as of October 3, 2025, compared to $842 million at the beginning of the year, primarily due to revenue recognized on certain contracts[47] - Contract liabilities increased to $396 million as of October 3, 2025, from $333 million at January 3, 2025, mainly due to advanced payments from customers[47] - The company reported restricted cash balances of $123 million as of October 3, 2025[38] - The balance of stockholders' equity at September 27, 2024, was $4,667 million, reflecting a decrease from $4,710 million at the end of the previous fiscal year[16] Investments and Acquisitions - The company utilized $292 million for the acquisition of a business, net of cash acquired, during the nine months ended October 3, 2025[16] - The acquisition of Kudu Dynamics was completed for a total consideration of $293 million, with $26 million and $38 million of revenues recognized from this acquisition in the three and nine months ended October 3, 2025, respectively[49][50] Tax and Compliance - The effective tax rate for the three months ended October 3, 2025, was 23.8%, an increase from 23.0% for the same period in 2024[78] - The company was in compliance with all financial covenants as of October 3, 2025, maintaining a ratio of adjusted consolidated total debt to consolidated EBITDA of not more than 3.75 to 1.00[71] - The company is currently cooperating with investigations by the Department of Justice and the SEC regarding international operations, which may have potential implications for its financial position[89] Future Outlook - As of October 3, 2025, the company had $17 billion of remaining performance obligations (RPO), expecting to recognize approximately 64% over the next 12 months and 82% over the next 24 months[40] - Estimated annual amortization expense for fiscal year 2026 is projected to be $111 million[55] Other - The company completed the divestiture of an immaterial business on October 31, 2025, which was not aligned with its long-term strategy[93] - Active indirect cost audits by the Defense Contract Audit Agency remain open for fiscal 2023 and subsequent years, which may impact future profitability[88]

Financial Data and Key Metrics Changes - The company reported a top-line growth of 7% for the quarter, with revenue reaching $4.47 billion, and a year-to-date revenue growth of 5% [4][20] - Adjusted EBITDA margin was 13.8%, with adjusted EBITDA of $616 million, reflecting a 3% year-over-year increase [21] - Non-GAAP diluted EPS grew 4% to $3.05, supported by a lower share count [21] - Operating cash flow for the quarter was $711 million, contributing to a free cash flow of $680 million, resulting in a free cash flow conversion ratio of 171% [25] Business Line Data and Key Metrics Changes - National Security and Digital revenues increased by 8% year-over-year, driven by contract awards and increased volumes for defense IT and mission support [22] - Health and Civil revenues grew by 6% year-over-year, with a record non-GAAP operating income margin of 25.7% due to high volumes in managed health services [23] - Defense Systems segment grew by 11% year-over-year, marking its seventh consecutive period of high single to low double-digit growth [24] Market Data and Key Metrics Changes - The company experienced a 27% sequential increase in funded backlog, indicating strong customer demand [16] - The U.S. utilities are expected to invest over $1 trillion in energy infrastructure over the next decade, presenting significant growth opportunities for the company [10] Company Strategy and Development Direction - The North Star 2030 strategy focuses on five growth pillars: space and maritime, energy infrastructure, digital modernization and cyber, mission software, and managed health services [8] - The company is committed to investing in innovation and technology to enhance customer outcomes and drive down costs [6][7] - The divestiture of Varik, a non-core legacy asset, aligns with the sharpened strategic focus of the company [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current government shutdown, noting that most programs remain unaffected [4] - The company raised its guidance for 2025, reaffirming revenue guidance of $17 billion to $17.25 billion and increasing adjusted EBITDA margin guidance [18][26] - Management highlighted a robust pipeline of near-term opportunities valued at $69 billion, with $24 billion in bids awaiting adjudication [16][54] Other Important Information - The company repurchased $100 million worth of shares and accelerated the payoff of $450 million on its term loan [17] - The company plans to continue investing in growth pillars while returning capital to shareholders [18] Q&A Session Summary Question: Thoughts on M&A in the current environment - Management indicated a shareholder-friendly approach to capital deployment, focusing on both organic and inorganic growth opportunities [31] Question: Growth outlook for defense systems - Management highlighted tracking 10 franchise programs expected to deliver about $15 billion in potential value over the next five years [36] Question: Sustainability of health and civil segment margins - Management expressed confidence in sustaining high margins through innovation and investment in technology [45][48] Question: Bid expectations for next year - Management expects a significant increase in bid submissions next year, with a strong pipeline of opportunities [54][55] Question: Impact of the government shutdown on Q4 - Management acknowledged potential risks from the shutdown but remained optimistic about returning to normal operations quickly [70] Question: Recompete contracts for next year - Management noted that it is too early to specify growth expectations for 2026, but several programs are expected to drive growth momentum [86]