LDOS
Leidos Holdings Inc
Industrial/Transportation, TMT
06/05/2017
Presented
| Date | 05/31/2017 |
| Price | $55.56 |
| Market Cap | $8.50B |
| Ent Value | $10.90B |
| P/E Ratio | 25.14x |
| Book Value | $21.04 |
| Div Yield | 2.29% |
| Shares O/S | 153.00M |
| Ave Daily Vol | 1,009,304 |
| Short Int | 3.88% |
Current
| Price | $167.70 |
| Market Cap | $22.59B |
| Leidos Holdings, Inc. operates as a holding company. It provides scientific, engineering, systems integration and technical services and solutions in the areas of defense, health, energy, infrastructure, intelligence, surveillance, reconnaissance and cyber security to agencies of the U.S. Department of defense, the intelligence community, the U.S. department of homeland security, and other U.S. government civil agencies, state and local government agencies, foreign governments and customers in select commercial markets. The company operates its business through the following segments: Health & Engineering, National Security Solutions and Corporate & Other. The Health and Engineering segment provides services and solutions to commercial hospitals and the department of defense as well as conducting research and development for U.S. government and commercial enterprises in the life sciences field. The National Security Solutions segment provides solutions and systems for air, land, sea, space and cyberspace for the U.S. intelligence community, the military services, and the U.S. department of homeland security. The Corporate and Other segment includes the operations of various corporate activities, certain expense items that are not reimbursed by its U.S. Government customers. Leidos Holdings was founded by John Robert Beyster on February 3, 1969 and is headquartered in Reston, VA. |
Publicly traded companies mentioned herein: Booz Allen Hamilton Holding Corp (BAH), CACI International Inc (CACI), General Dynamics Corporation (GD), Leidos Holdings Inc (LDOS), Lockheed Martin Corp (LMT), Raytheon Company (RTN), Science Applications International Corp (SAIC)
Highlights
The Leidos (LDOS) that exists today is a result of a relatively complex, tax-advantaged Reverse Morris Trust deal that involved a merger with Lockheed Martin’s IT and government services subsidiary in August 2016. This was following its own split from SAIC in late 2013. The setup for the “beltway bandits” - as the cluster of government contractors is known - is favorable, and the presenter is long LDOS. President Trump wants to increase funding after 6-7 years of sequestration, and one manifestation of this may be the utilization of outsourced labor to achieve greater cost savings. Defense spending as a percentage of GDP has been down, but this year could be an important inflection point because the market should gain clarity heading into September (2017) as the funding is part of the debt-ceiling debate, and the plan for FY 2018 will become clearer. If LDOS et al are just “in the fourth inning” of the game, and his assumptions and forecast prove to be accurate, the company’s earnings could grow from ~$3.30/ share in 2017 to $4+ next year, which is $0.40-0.45/share ahead of Street estimates. In this scenario, the stock could trade up to $72 (18x $4/ share of 2018 earnings), and there is optionality on future M&A and earnings growth heading into 2019.
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