By Calvin Biesecker
Leidos on Tuesday posted higher sales and earnings due to top-line growth across its business segments and higher operating income in its Health and Civil segments.
Net income increased 65 percent to $188 million, $1.25 earnings per share (EPS), from $114 million (74 cents EPS) a year ago. The strong earnings were driven by a huge increase in operating income, in large part due to higher acquisition and restructuring costs a year ago. Lower taxes also provided a bigger benefit to the company’s results a year ago.
Adjusted earnings, which exclude various non-operating costs, were $1.10 EPS in the quarter versus 87 cents EPS a year ago, topping consensus estimates by three pennies.
Sales grew 5 percent to $2.7 billion from $2.5 billion a year ago on new programs in the Defense segment, higher volume in the Health and Civil segments. Leidos said the partial shutdown of the federal government from December into January had an immaterial impact on its quarterly results.
Leidos is a partner in Mission Support Alliance, the support services contractor for the Department of Energy’s Hanford Site in Washington state. The contractor, which Leidos owns with Centerra, has a 10-year, $3 billion contract that expires in May.
In the company’s earnings call Tuesday, Chairman and CEO Roger Krone cited a bid on the follow-on Hanford support services award as part of Leidos’ $28 billion in outstanding bids.
Leidos is also among the partners in Bechtel-led Consolidated Nuclear Security, which manages the Y-12 National Security Complex in Tennessee and the Pantex Plant in Texas for DOE’s semiautonomous National Nuclear Security Administration. Consolidated Nuclear Security’s contract, awarded in 2014, is valued at about $2 billion per year over a decade, with options.
The company has also provided technical support for the NNSA at several locations and subcontracted to Savannah River Site, S.C., management and operations prime Savannah River Nuclear Solutions.
Leidos books all of its Department of Energy business in the company’s Civil segment, where 2018 operating profit rose almost $65 million to $290 million. Annual revenue was up $20 million to about $3.4 billion.
For the year, company-wide net income increased 59 percent to $581 million ($3.80 EPS) from $366 million ($2.38 EPS) in 2017. Sales were flat at $10.2 billion. Segment operating margin increased to 7.3 percent from 5.5 percent.
Orders in the quarter were $3.2 billion and for the year a record $13.7 billion and total backlog at the end of 2018 was a record $20.8 billion, up 19 percent from $17.5 billion a year ago.
Leidos introduced guidance for 2019 with sales expected to be up between 3 and 7 percent to between $10.5 billion and $10.9 billion and adjusted earnings between $4.25 and $4.60 EPS.
This story first appeared in Weapons Complex Monitor‘s affiliate publication, Defense Daily.
