Leidos Holdings, Inc. (LDOS) has gained attention in the Zacks Aerospace Defense industry due to its increasing earnings estimates, impressive return on equity (ROE), and a solid backlog, making it a compelling investment choice.
Let’s explore why this Zacks Rank #2 (Buy) stock is a favorable option currently.
Growth Projections & Earnings Performance
The Zacks Consensus Estimate for Leidos’ 2025 earnings per share (EPS) recently rose by 1.2% to $10.44 over the past two months. The company also projects total revenues of $17.09 billion for 2025, reflecting a 2.6% increase from the reported figures in 2024.
Over a long-term horizon of three to five years, Leidos anticipates an earnings growth rate of 7.4%. Additionally, it has achieved an average earnings surprise of 28.34% within the last four quarters.
Strong Return on Equity
Return on equity (ROE) is a measure of how effectively a company uses its funds to generate profits. Currently, Leidos boasts an ROE of 30.93%, significantly higher than the industry average of 9.53%. This suggests that Leidos is leveraging its assets more efficiently than many competitors.
Debt Management
Leidos maintains a total debt to capital ratio of 50.03%, which is more favorable than the industry average of 55%. In the fourth quarter of 2024, the company reported a times interest earned (TIE) ratio of 9.5, indicating robust capability to meet its interest payment obligations.
Liquidity Position
As of the end of the fourth quarter of 2024, Leidos reported a current ratio of 1.21. This figure, greater than 1, demonstrates the company’s capacity to fulfill its short-term liabilities comfortably.
Growing Backlog
Leidos secures significant revenues from contracts with the Pentagon and other U.S. allies, particularly for its cost-effective military technologies. This strategy has led to a substantial backlog of $43.6 billion as of January 3, 2025, a notable increase from $37 billion the previous year. Such a backlog is crucial as it enhances future revenue potential.
Stock Performance Overview
Over the past year, LDOS shares have climbed 6.8%, contrasting with a decline of 5.5% in the broader industry.
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Other Stocks Worth Watching
Several other high-ranking stocks in the Aerospace Defense sector include Kratos Defense & Security Solutions, Inc. (KTOS), RTX Corporation (RTX), and FTAI Aviation Ltd. (FTAI), all currently rated Zacks Rank #2 (Buy). You can find the complete list of Zacks #1 Rank (Strong Buy) stocks available here.
KTOS has delivered an outstanding average earnings surprise of 70.63% over its last four quarters. The 2025 total revenue estimate for KTOS stands at $1.28 billion, highlighting a growth projection of 12.2% from 2024 figures.
Meanwhile, RTX aims for a long-term earnings growth rate of 9.7% with a 2025 sales projection of $84.28 billion, implying a 4.4% increase from the previous year. Finally, FTAI has achieved an average earnings surprise of 30.65% in the past four quarters, with its 2025 revenue estimate at $2.06 billion, reflecting a growth of 20.2% from 2024.
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