Leidos Boosts Full-Year Guidance on 3Q Earnings Beat, Huntington Ingalls Misses Street’s Estimates

GovCon Index-listed companies Leidos Holdings (NYSE: LDOS) and Huntington Ingalls Industries (NYSE: HII) released third quarter financial results before markets opened Thursday with both contractors at different stages in major merger-and-acquisition activity.

Leidos, the U.S.’ largest government services provider, raised full-year guidance for both earnings per share and revenue as third quarter EPS exceeded the consensus Wall Street forecast with revenue just shy of analysts’ expectations.

Leidos’ report represents its first financial statement since the closure of the Reston, Virginia-based company’s merger with the former Lockheed Martin (NYSE: LMT) information systems and global solutions segment on Aug. 16 to double in size.

For Huntington Ingalls, the military shipbuilder stated results a day after it announced the $380 million acquisition of Camber Corp. to add new information technology and other services-related work with defense, intelligence and civilian agencies.

Newport News, Virginia-based Huntington Ingalls posted earnings and revenue below analysts’ forecasts on a year-over-year sales decline from lower volumes in the construction contract for the USS Gerald R. Ford aircraft carrier and the USS Abraham Lincoln refueling and complex overhaul program.

As of Wednesday’s close, the GovCon Index has risen 4.61 percent on a year-to-date basis and is up 2.79 percent for 52 weeks.

Leidos:

• Earnings per share: $1.25 beats Wall Street estimate of $0.96
• Net income: $92 million, up 85.71 percent from prior year period
• Revenue: $1.87 billion misses Wall Street estimate of $1.9 billion
• Guidance:
  • Earnings raised to $3.50-$3.60 per share from prior $3.15-$3.35 range
  • Revenue raised to $7 billion-$7.1 billion from prior $6.8 billion-$7 billion range
• Notes:
  • Third quarter revenue includes $620 million from the former Lockheed IS&GS segment
  • Organic revenue up 5.04 percent year-over-year excluding IS&GS and construction divestiture
  • Net bookings totaled $2.9 billion for book-to-bill ratio of 1.56x
  • Backlog as of Sept. 30 totaled $18.7 billion with $5.6 billion funded
• Stock is flat since the start of the year and has risen 6.49 percent over 12 months

Huntington Ingalls Industries:

• Earnings per share: $2.27 misses Wall Street estimate of $2.40
• Net income: $107 million,  down 3.6 percent from prior year period
• Revenue: $1.68 billion, down 6.5 percent, misses Wall Street estimate of $1.76 billion
• Guidance not stated in release
• Notes:
  • Company expects full-year revenue “relatively similar” to $7.02 billion from 2015
  • Company expects full-year capital expenditures at 4-4.5 percent of revenue
  • Free cash flow year-to-date at $332 million,  two-thirds deployed for stock buybacks and dividends
• Stock is up 27.21 percent from the year’s start and 33.38 percent over 12 months