Leidos: Q4 Earnings Snapshot - A Beacon of Strength in Government Services

Leidos (LDOS) has just released its Q4 and FY 2024 earnings, and the results are nothing short of impressive. The company reported revenues of $4.4 billion for Q4, up 10% year-over-year (YoY), and $16.7 billion for the full year, up 8% YoY. Diluted EPS for Q4 was $2.12, up 28% YoY, while full-year EPS reached $9.22, up a staggering 540% YoY. These strong results reflect Leidos' exceptional operational execution and strategic positioning in high-priority government sectors.



Three key factors underscore the strength of these results:

1. Impressive Backlog: Leidos' backlog grew to $43.6 billion, up 18% YoY, with a 2024 book-to-bill ratio of 1.4. This impressive backlog provides exceptional revenue visibility, representing approximately 2.6 years of revenue coverage at current run rates. This indicates a healthy pipeline of future revenue and supports the sustainability of Leidos' growth momentum.
2. Working Capital Efficiency: Leidos maintains strong working capital efficiency, with Days Sales Outstanding (DSO) at 59 days. This indicates superior cash conversion capabilities and supports the company's operational efficiency. This efficiency helps ensure that Leidos can effectively manage its cash flow and maintain its growth momentum.
3. Margin Expansion: Leidos' adjusted EBITDA margins improved to 12.9% for the year, driven by enhanced program execution and cost control measures. This suggests structural improvements in operational efficiency rather than temporary gains. This margin expansion story is particularly compelling, as it indicates that Leidos is focused on driving long-term profitability and growth.



Leidos' recent contract victories, such as the $4.1 billion IFPC contract and the $2.6 billion TSA agreement, demonstrate the company's expanding footprint in mission-critical government infrastructure. These wins indicate Leidos' ability to secure high-value, strategic projects and further support the company's growth momentum.

The diversification of Leidos' defense capabilities is evident in its contract mix, which includes entry into advanced weapons systems, AI-driven sustainment programs, and critical infrastructure protection. This portfolio transformation towards technology-intensive programs suggests improving margins and competitive moats. The focus on enduring mission-critical needs, particularly in emerging threat domains like hypersonics and missile defense, indicates strong alignment with DoD modernization priorities and suggests sustained growth potential.

Leidos' 2025 guidance of $16.9-17.3 billion in revenue appears conservative given the current momentum and backlog strength. This suggests that the company is being cautious in its projections, which could lead to positive surprises and further boost investor confidence in the sustainability of its growth.

In conclusion, Leidos' strong Q4 and FY 2024 performance reflects the company's exceptional operational execution and strategic positioning in high-priority government sectors. The impressive backlog, working capital efficiency, and margin expansion indicate a company focused on driving long-term growth and profitability. With a conservative revenue guidance and a strong pipeline of future revenue, Leidos is well-positioned to continue its growth momentum in the coming years.