LDOS – Market expectations are for Uniform ROA compression, but management is confident about their segment growth, contracts, and capital allocation

• Leidos Holdings, Inc. (LDOS:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 16.5x Uniform P/E, implying bearish expectations for the firm. However, management is confident about their Defense Solutions segment growth, the Navy NextGen contract, and their capital
  allocation plan
  
  

• Specifically, management is confident that revenues in their Defense Solutions segment accelerated throughout the year, that they invested in their employees through improved benefits, and that they are taking on no hardware implementation risk in the Navy NextGen contract. In addition, they are confident that their balance between share repurchases, dividends, M&A, and capex is consistent with their capital allocation plan and that companies need to have already done prerequisite work in order to bid on opportunities in their space