Leidos backed away from a buy point Thursday, despite a late-Wednesday upgrade based not solely on its defense and aerospace segments, but also on the strength of its health services business.
RBC Capital Markets analyst Ken Herbert on Wednesday upgraded Leidos to outperform from sector perform with a price target of 210, up from 180, representing 18% upside compared to Wednesday's closing price. Herbert cited solid execution in Leidos' health services business, strong defense portfolio positioning and increased confidence under CEO Tom Bell.
The Reston, Va.-based company's health business saw Q2 sales increase slightly less than 1% to $1.27 billion. For the full year, analysts expect health and services revenue to grow about 2% to $5.12 billion and hover around that level through 2027, according to FactSet.
RBC Capital also noted that the company is expected to continue to beat earnings estimates and raise forecasts.
Leidos stock edged down around 1% prior to Thursday's stock market open and is about 3% below a traditional 182.88 buy point from a cup-with-handle base, according to MarketSurge charts.
Leidos Earnings And Stock Performance
On Aug. 5, Leidos stock jumped more than 7% as the defense and aerospace technology company topped estimates for Q2 results. Leidos reported a 22% increase in earnings to a record $3.21 per share with revenue climbing 3% to $4.25 billion.
Leidos also raised its 2025 guidance with results. The company expects revenue to range from $17 billion to $17.25 billion, narrowed from its prior forecast for $16.90 billion to $17.30 billion. Earnings are expected to range from $11.15 per share adjusted to $11.45 per share. Leidos previously anticipated earnings between $10.35 and $10.75 per share adjusted.
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The company noted that demand grew across all customer segments, particularly for its defense systems unit. Leidos also recorded $3.9 billion in net bookings during the quarter, bringing the total backlog to $46.2 billion. Of the backlog, $7.1 billion in contract awards is already funded.
The company added that it was awarded two significant classified awards for the intelligence community. The first is a 10-year contract valued at $1.3 billion, while the second is a six-year, $390 million recompete contract. Leidos also received a $350 million subcontract from Huntington Ingalls Industries to provide electronic warfare engineering and hardware solutions for Huntington Ingalls and the Air Force.
Shares gained 13.3% in August, the sixth consecutive monthly advance, and are up 10% since Q2 earnings. LDOS has added 23% in the 2025 stock market.
The 34 stocks in the IBD-tracked Commercial Services-Consulting industry group have collectively edged up 4.8% in this year's stock market. However, the industry group has booked five straight monthly advances.
Leidos stock has an 87 Composite Rating out of a best-possible 99. The stock also has an 83 Relative Strength Rating and a 94 EPS Rating.
Please follow Kit Norton on X @KitNorton for more coverage.
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