Leidos Holdings (LDOS) PT Raised to $92 at Cowen on Upside/Outlook Albeit Messy

Cowen analyst Cai von Rumohr raised the price target on Leidos Holdings (NYSE: LDOS) to $92.00 (from $89.00) after the company reported Revenues of $2,835MM (+12% organic) that beat expectations by $70MM (+2.5%) on new program ramps at Civil (+$83MM; +10%) and Defense (+8%). EPS of $1.36 beat expectations by 17c on a 12% increase in organic sales, a healthy 1.8x book-bill, and FCF of $328MM. The earnings upside wasn't completely clean since the 17c of upside included a 31c gain on the Greek Olympics arbitration, a loss of 10c on bad debt reserves on two mideast contracts, lower favorable EACS, and start-up costs on new Defense/Civil contracts.

The analyst reiterated his Outperform rating stating "Barring unlikely loss of Hanford/GSM-O recompetes or a Nextgen takeaway win, we look for 8-10% organic growth next year, driven by DHMSM ramp and the NASA NEST and AF ISR takeaways. In addition, aided by margin accretion from the high margin IMX acquisition and divestiture of the lower margin Health staffing business, we look for adj. EBITDA margin of 10.1% vs. LDOS' prior guide of at least 10%".

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