July 19, 2021 8:00 AM
 — 
3
 min

Leidos remains our favorite in the sector

buy

Second quarter results are likely to support Leidos stock as the company posted strong growth in defense IT orders in June. We forecast over 10% organic revenue growth for the company in 2021. In 2022, growth will continue, but at a less modest pace of 6-10%. With the company's attractive 12x TEV / EBITDA valuation, Leidos remains our top pick in the sector.

TIKR
LDOS

PRICE
106$

TARGET PRICE
119$

UPSIDE
19%

S&P 500
4,257(+0.15%)

WTI СRUDE
66,52 (+0.32%)

10Y UST
1,181(-8.15%)

BITCOIN
$29,536(-5.65%)

We expect Leidos management to raise its revenue forecast for 2021 to reflect the acquisition of Gibbs & Cox and the successful results of RHRP. We expect sales of security products to rebound as air travel opens in 2H21. Thus, any comments on growth in 2022 are likely to be received positively by investors.

Leidos Holdings provides cybersecurity, information technology, and analytics services to government agencies and companies in the defense, intelligence, homeland security, civil, and health markets. The company's areas of expertise include operations and logistics; sensors; software development; and systems engineering. It also operates one of the country's largest health system integrators. Most of the company's revenue (over 85%) comes from the US government.

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