On Wednesday, Baird increased its price target on shares of Leidos Holdings (NYSE:LDOS), a prominent science and technology solutions company, to $180 from the previous target of $145. The firm also reiterated its Outperform rating on the stock.
The adjustment follows Leidos' first-quarter performance for the year 2024, which showcased robust revenue and earnings per share (EPS) above expectations. This performance was attributed to significant margin growth, with EBITDA margins reaching 12.3%, a year-over-year increase of 290 basis points.
The company's first-quarter success was largely credited to CEO Tom Bell's emphasis on program execution and cost management. Baird's analyst highlighted Bell's effective leadership in driving the company's financial results.
As a result of the strong quarter, Leidos has also updated its organic growth projections for 2024, raising estimates by 2 percentage points to a range of 3%-6%. This optimistic adjustment reflects the vigorous expansion within the Civil/Health segment, while the National Security and Digital Modernization segments are performing steadily, aligning with the overall company average.
The Civil/Health segment, in particular, has been a standout for Leidos, showing robust growth that has contributed to the firm's decision to raise the price target. This segment, along with the consistent results from the National Security and Digital Modernization sectors, underscores the company's solid performance across its diverse portfolio.
Baird's revised price target is based on a free cash flow (FCF) yield of 5%, which is an improvement from the previously estimated 6% FCF yield. This new target reflects the analyst's confidence in Leidos Holdings' growth trajectory and its ability to continue delivering shareholder value through effective business strategies and strong market performance.
Leidos Holdings' stock price adjustment by Baird indicates a positive outlook for the company's financial health and prospects. The firm's analysis suggests that Leidos is well-positioned to maintain its growth momentum and deliver on its increased organic growth projections for the year 2024.
InvestingPro Insights
Following Baird's price target increase for Leidos Holdings (NYSE:LDOS), InvestingPro data and insights provide additional context to the company's financial health and market performance. Leidos' market capitalization stands at a solid $18.94B, reflecting its significant presence in the industry. Despite a high P/E ratio of 27.24 for the last twelve months as of Q1 2023, the company's revenue growth during the same period was 7.24%, indicating a robust expansion in its operations. Moreover, with a gross profit margin of 14.54% and an operating income margin of 8.43%, Leidos demonstrates a strong ability to convert sales into profit.
Two InvestingPro Tips relevant to the article's context include the company's consistent dividend growth, having raised its dividend for 5 consecutive years, and the expectation of net income growth this year. These tips underscore the company's commitment to shareholder returns and its optimistic financial outlook. For readers interested in a deeper dive into Leidos' financials and performance, there are 18 additional tips available on InvestingPro. Plus, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing even more value to those looking to invest wisely.
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