Key insights
- Leidos Holdings (LDO) reported strong Q1 earnings with revenue and EPS beating consensus. The company raised its FY2026 guidance, citing significant backlog growth and high-value contract wins, particularly in defense and cyber. With a forward P/E around 10x and substantial backlog visibility, the stock appears undervalued relative to its growth trajectory and market position as a key IT provider to the US DoD. Aggressive share buybacks further signal management confidence.
What am I missing here? Seems undervalued and also on an insane growth trajectory on all cylinders????
Revenue: $4.40B (Up 4% year-over-year, beating analyst consensus).
Adjusted EPS: $3.13 (A massive beat against the $2.90 Wall Street estimate).
Adjusted EBITDA Margin: 14% ($614M).
The Backlog: $48.4 Billion. Read that number again. Their current backlog is more than 3x their entire market cap. That is years of highly secure, contracted government revenue visibility.
Management's Response: They were so confident that they raised full-year FY2026 guidance.
They are now projecting:
Full-year Revenue: $18.0B – $18.4B (Up $500M from previous guidance).
Full-year Non-GAAP EPS: $12.10 – $12.50. Operating Cash Flow: ~$1.8B.
~10x forward earnings, the market is pricing Leidos like a dying brick-and-mortar retail business, not the largest primary IT provider to the US Department of Defense.
High-Value Wins: In May alone, they secured a massive $2.7B hypersonic weapons production contract. Their newly acquired Kudu Dynamics integration also drove their total cyber pipeline up 21% to $24B.
Capital Return: They aggressively bought back $200M of their own stock in Q1.