What's in Store for Leidos Holdings (LDOS) in Q2 Earnings?

Leidos Holdings, Inc. LDOS is scheduled to release second-quarter 2020 results on Aug 4, before market opens. In the last-reported quarter, the company delivered a negative earnings surprise of 4.03%.

However, Leidos Holdings delivered a surprise of 6.65%, on average, in the trailing four quarters.

Let’s discuss how things have shaped ahead of the announcement.

Factors at Play

In May 2020, Leidos Holdings completed the acquisition of L3Harris Technologies' LHX Security Detection and Automation businesses for $1 billion. Notably, positive synergies from this buyout are expected to have bolstered the company’s second-quarter top line performance.

Leidos Holdings, Inc. Price and EPS Surprise

Leidos Holdings, Inc. Price and EPS Surprise

Leidos Holdings, Inc. price-eps-surprise | Leidos Holdings, Inc. Quote

The defense sector has remained more resilient to the novel coronavirus outbreak. With Leidos Holdings generating almost half of its revenues from the Defense Solutions segment, steady order growth from Pentagon and other U.S. allies is expected to have boosted defense revenues.  

In its health business, amid the coronavirus pandemic, the company has been exploring opportunities to develop and offer virtual care solutions, to support a range of activities from patient intake and pre-screening to virtual visits with staff physicians via remote monitoring within the hospital, or other care environments. These must have boosted new program revenues for the company in the to-be-reported quarter

Notably, the Zacks Consensus Estimate for second-quarter revenues is pegged at $3.04 billion, which indicates a rise of 11.5% from the year-ago quarter’s reported figure.

However, the impacts of the pandemic are likely to have pushed up expenses for the company. For instance, to tackle COVID-19 crisis, Leidos Holdings has enabled teleworking capabilities through hardware software and cloud-based service deployments. To support this, the company has been hiring aggressively, having hired 1800 in the first quarter. This along with acquisition related expenses must have weighed on its quarterly bottom line.

The Zacks Consensus Estimate for second-quarter earnings per share is pegged at $1.07, which indicates a decline of 7.8% from the year-ago quarter’s reported figure.

Moreover, in May, Leidos Holdings earned a payment of $84.6 million from VirnetX, resulting from the VirnetX, Inc. lawsuit against Apple Inc. for infringing VirnetX patents. We expect Leidos Holdings’ balance sheet to reflect this payment.

Earnings Whispers

Our proven model predicts an earnings beat for Leidos Holdings this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Leidos Holdings has an Earnings ESP of +0.11% and carries a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Defense Releases

Teledyne Technologies TDY reported second-quarter 2020 adjusted earnings of $2.43 per share, which surpassed the Zacks Consensus Estimate of $2.01 by 20.9%.

Lockheed Martin LMT reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%.

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Lockheed Martin Corporation (LMT): Free Stock Analysis Report
Teledyne Technologies Incorporated (TDY): Free Stock Analysis Report
Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report
L3Harris Technologies Inc (LHX): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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