Leidos [LDOS] on Thursday reported higher earnings in its first quarter despite a dip in sales as the bottom line results were driven by lower acquisition integration and restructuring costs and stronger program performance in its Defense Solutions and Civil segments.
Net income soared 38 percent to $102 million, 66 cents earnings per share (EPS), from $72 million (47 cents EPS) a year ago. Operating margin rose a percent to 6.5 percent.
Excluding the charges from a year ago related to the acquisition of a former Lockheed Martin [LMT] segment and restructuring, adjusted earnings were $1.03 per share, in line with consensus estimates. Leidos executives on the company’s investor call said that the last of the major acquisition integration activities has been completed.
Sales slipped 5 percent to $2.4 billion from $2.6 billion a year ago. The biggest culprit in the lower sales was the Defense Solutions segment due to timing of revenue on certain contracts. The company’s other two segments were also down on sales, with Health Solutions off on revenue timing and the completion of certain contracts and Civil down slightly on lower international work and the completion work a year ago.
Guidance for 2018 was unchanged.
Jefferies analyst Sheila Kahyaoglu in a note to clients said the results are a “slow start to the year,” but highlighted that Leidos’ bookings, which were $2.5 billion, point the way to “improvement.” Bookings were higher than a year ago, driven by strong orders in Defense Solutions.
Roger Krone, Leidos chairman and CEO, said that defense bookings stem from the focus the past year on business development and customer relations.
Total backlog at the end of the quarter stood at $17.6 billion, up slightly from $17.5 billion at the end of 2017. Funded backlog at the end of the quarter was $4.6 billion versus $5 billion at the end of 2017.