Why Leidos Stock Is Higher Today

Government information technology (IT) and defense vendor Leidos Holdings (NYSE: LDOS) easily topped quarterly expectations and raised guidance for the full year. Investors are buying in, sending shares of Leidos up 7% in the first half hour of trading on Tuesday.

Strong results across the business

Although most of the attention is focused on Palantir Technologies, Leidos is actually the largest provider of tech and systems management for the Pentagon and other government agencies. The company earned $2.29 per share in the first quarter on revenue of $3.98 billion, topping Wall Street's consensus $1.70 per share in earnings on sales of $3.8 billion. Revenue was up 7% year over year, led by significant strength in the company's health and civil agency business.

"Our strong start to the year demonstrates the team's ability to deliver for its employees, customers, and shareholders," CEO Thomas Bell said in a statement. "We fully expect that 2024 will showcase our commitment to profitable growth."

Leidos now says it expects to earn between $8.40 and $8.80 per share in 2024, a boost to the company's previous guidance of $7.50 to $7.90 and well above the $7.85 per-share consensus estimate. Full-year revenue guidance was also raised by $300 million at the low and high ends to $16 billion to $16.4 billion.

Is Leidos a buy following its strong earnings report?

Healthcare and, in particular, the company's business providing medical exams to government officials, led the way, but it's worth noting that all four segments of the business came in ahead of expectations. Net bookings at the end of the quarter came in at $3.7 billion, meaning Leidos has won about $1.10 in new business for every $1 in revenue it has taken in over the last 12 months.

Leidos has a history of raising full-year guidance as the year progresses, but the big boost after the first quarter is surprisingly aggressive and implies management is feeling confident about what lies ahead. Heading into 2024, these IT specialists appeared to be the best choices for investors among defense stocks, and Leidos is demonstrating why it's a leader in the field.

Should you invest $1,000 in Leidos right now?

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Lou Whiteman has positions in Leidos. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

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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