Leidos Holdings [LDOS] announced July 28 that its operating income totaled $75 million in the second quarter of fiscal year 2016, up 17 percent from the same period last year.
The operating income margin from the company’s National Security Solutions segment was 6.7 percent, down from 8.4 percent last year due mainly to “lower program fees and contract mix,” Leidos said. Meanwhile, the Health and Infrastructure Sector’s margin was 10.5 percent, up from a negative radio of 1.8 percent thanks to improved fee performance from federal and commercial health business.
“Our second-quarter results were in line with our expectations and reflect strong organic growth in both of our business segments,” said Roger Krone, Leidos chairman and CEO.
Overall, Leidos revenue was $1.29 billion, a 2 percent increase. National Security Solutions revenue rose 4 percent, mainly due to a new logistics contract from the United Kingdom Ministry of Defense. The company’s cybersecurity business had a strong performance, which is expected to continue, Krone said.
Health and Infrastructure revenue decreased 2 percent, mainly due to the divestiture of a design, build and heavy construction engineering services business and the sale of a renewable energy facility.
For the year, Leidos now projects earnings per share of $2.85 to $3.05, up from the previous estimate of $2.75 to $2.95. Revenue is expected to total $5.1 billion to $5.2 billion, compared to earlier guidance of $5.1 billion to $5.3 billion.
“Our end markets are gradually improving, and despite a slower pace of procurement activity from our customers for new awards, we are seeing increases in scope and the expansion in some of our existing contracts,” Krone told investors. “All this [is] giving us increased confidence in our full-year outlook.”
Krone said Leidos has a strong balance sheet ahead of its merger with Lockheed Martin’s [LMT] government services business. The deal has received U.S. and international regulatory approval and is on track to close in mid-August.
While Congress may have to pass a continuing resolution to keep the federal government running in October, the impact on Leidos will likely be minimal, according to Krone.