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Leonardo DRS (DRS)
NASDAQ:DRS
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Leonardo Drs
(NASDAQ:DRS)
78Outperform
Positive Factors
Capital Deployment
Management's change in stance to a more shareholder friendly capital deployment approach includes the company's first dividend payment and a share buyback program.
Earnings
The company’s 3Q earnings beat and 2024 outlook increase led to an ~11.4% rise in stock, while the broader market was down.
Financial Performance
DRS reported adjusted EPS above consensus and their own estimates, driven by stronger-than-expected operating performance.
Negative Factors
International Trade
China's ban on germanium export poses a risk to the weapon sights business, although DRS has several years worth of supply on hand.
Market Conditions
Trading volumes remain low and upside shipbuilding opportunities might not be realized until the South Carolina facility is operational.
Valuation
The stock is trading at fair value with limited upside to current trading multiples.
Leonardo Drs (DRS) vs. S&P 500 (SPY)
Market Cap
$8.75B
Dividend YieldN/A
Average Volume (3M)979.01K
Price to Earnings (P/E)42.7
Beta (1Y)1.01
Revenue Growth14.44%
EPS Growth26.36%
CountryUS
Employees7,000
SectorIndustrials
Sector Strength70
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.79
Shares Outstanding265,157,680
10 Day Avg. Volume1,004,395
30 Day Avg. Volume979,013
Financial Highlights & Ratios
PEG Ratio1.62
Price to Book (P/B)N/A
Price to Sales (P/S)2.71
Price to Cash Flow (P/CF)4.90
P/FCF Ratio5.30
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$36.75Price Target Upside8.25% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering5
Leonardo Drs Business Overview & Revenue Model
Company DescriptionLeonardo DRS, Inc., together with its subsidiaries, provides defense products and technologies in the land, air, sea, space, cyber and security, and commercial domains for military applications. It operates in two segments, Advanced Sensing and Computing, and Integrated Mission Systems. The company offers advanced sensor technologies, including infrared systems and sensors for threat detection and situational awareness; uncooled infrared systems and brownout solutions; airborne, ground vehicle mounted, and dismounted soldier electronic warfare (EW) systems; and EW software and training systems, and intelligence solutions. It also provides computing systems for ground vehicles, ships, and submarines; network and data distribution applications; sensor systems; and networked computing infrastructure on military platform. In addition, the company offers force protection systems, such as solutions for counter-unmanned aerial systems, short-range air defense systems, and active protection systems; and power control, distribution, conversion, and propulsion systems, as well as hybrid electric drive propulsion systems, energy storage, gas turbine packages, nuclear instrumentation and controls, and thermal management and refrigeration equipment. It serves the U.S. military, aerospace and defense prime contractors, government intelligence agencies, and international military customers. The company was founded in 1969 and is based in Arlington, Virginia.
How the Company Makes MoneyLeonardo DRS generates revenue primarily through government contracts and defense procurement programs. A significant portion of its income comes from the U.S. Department of Defense, as it supplies various branches of the military with advanced technology and systems. The company also earns from international sales to allied nations, which rely on its expertise in areas like naval defense and electronic warfare systems. Additionally, Leonardo DRS engages in strategic partnerships and collaborations to enhance its product offerings and expand market reach, contributing to its revenue streams. The firm's ability to innovate and adapt its solutions to evolving defense needs plays a crucial role in maintaining a steady revenue flow.
Leonardo Drs Financial Statement Overview
Summary
Leonardo DRS exhibits robust financial health with strong revenue growth and profitability indicators. The balance sheet reflects a stable capital structure with low leverage, while the cash flow statement highlights effective cash management. Despite these strengths, there is room for improving operational efficiency and maximizing returns on equity.Income Statement
Leonardo DRS has demonstrated strong revenue growth, with a 14.42% increase from 2023 to 2024. The gross profit margin improved to 22.76%, and the net profit margin increased to 6.59%, indicating efficient cost management and profitability enhancement. However, the EBITDA margin slightly decreased from previous years, suggesting room for improvement in operational efficiency.85
Very Positive
Balance Sheet
The company maintains a solid equity position with an equity ratio of 61.09%, indicating a stable financial structure. The debt-to-equity ratio of 0.14 demonstrates conservative leverage, reducing financial risk. However, the return on equity decreased to 8.33%, pointing to a potential need for more efficient use of equity capital.78
Positive
Cash Flow
Leonardo DRS shows strong cash flow management with a significant free cash flow growth of 28.28% from 2023 to 2024, enhancing liquidity. The operating cash flow to net income ratio is 1.27, indicating effective cash generation relative to reported earnings. However, the free cash flow to net income ratio of 0.87 suggests that a portion of earnings is tied up in capital investments.80
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 3.23B | 2.83B | 2.69B | 2.88B | 2.78B | Gross Profit |
| 736.00M | 648.00M | 575.00M | 547.00M | 494.00M | EBIT |
| 293.00M | 231.00M | 561.00M | 236.00M | 181.00M | EBITDA |
| 376.00M | 313.00M | 624.00M | 293.00M | 229.00M | Net Income Common Stockholders |
| 213.00M | 168.00M | 405.00M | 154.00M | 85.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 598.00M | 467.00M | 306.00M | 240.00M | 61.00M | Total Assets |
| 4.18B | 3.92B | 3.68B | 3.07B | 2.96B | Total Debt |
| 458.00M | 497.00M | 394.00M | 490.00M | 530.00M | Net Debt |
| -140.00M | 30.00M | 88.00M | 250.00M | 469.00M | Total Liabilities |
| 1.63B | 1.60B | 1.55B | 1.48B | 1.53B | Stockholders Equity |
| 2.56B | 2.33B | 2.13B | 1.59B | 1.43B |
| Cash Flow | Free Cash Flow | |||
| 186.00M | 145.00M | -32.00M | 118.00M | 69.00M | Operating Cash Flow |
| 271.00M | 205.00M | 33.00M | 178.00M | 125.00M | Investing Cash Flow |
| -84.00M | -59.00M | 436.00M | 39.00M | -70.00M | Financing Cash Flow |
| -56.00M | 15.00M | -403.00M | -38.00M | -80.00M |
Leonardo Drs Technical Analysis
Positive
33.95
Price Trends
32.90
Positive
33.29
Positive
30.30
Positive
Market Momentum
0.47
Negative
58.50
Neutral
67.70
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DRS, the sentiment is Positive. The current price of 33.95 is above the 20-day moving average (MA) of 31.48, above the 50-day MA of 32.90, and above the 200-day MA of 30.30, indicating a bullish trend. The MACD of 0.47 indicates Negative momentum. The RSI at 58.50 is Neutral, neither overbought nor oversold. The STOCH value of 67.70 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for DRS.
Leonardo Drs Risk Analysis
Leonardo Drs disclosed 55 risk factors in its most recent earnings report. Leonardo Drs reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Leonardo Drs Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $71.67B | 17.32 | 27.75% | 1.64% | 4.44% | 110.33% | |
78 Outperform | $39.04B | 26.41 | 7.85% | 2.23% | 9.82% | 22.33% | |
78 Outperform | $8.75B | 42.71 | 8.73% | ― | 14.44% | 26.36% | |
77 Outperform | $176.73B | 37.25 | 7.96% | 1.90% | 17.15% | 58.66% | |
75 Outperform | $71.88B | 19.33 | 17.44% | 2.16% | 12.88% | 13.78% | |
74 Outperform | $103.50B | 19.71 | 81.04% | 2.90% | 5.14% | -19.14% | |
62 Neutral | $8.27B | 14.03 | 2.36% | 3.08% | 3.85% | -14.32% |
* Industrials Sector Average
Performance Comparison
DRS
Leonardo Drs
33.95
12.16
55.81%
GD
General Dynamics
265.88
-6.96
-2.55%
LHX
L3Harris Technologies
210.71
3.83
1.85%
LMT
Lockheed Martin
434.98
0.39
0.09%
NOC
Northrop Grumman
495.08
33.12
7.17%
RTX
RTX
134.69
40.69
43.29%
Leonardo Drs Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: 15.28% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance with record bookings, revenue growth, and significant investment in future capabilities. However, challenges such as potential program timing issues, new administration policies, and material supply chain risks were noted. The overall sentiment is positive, with a strong outlook for 2025.Highlights
Record Bookings and Revenue Growth
Leonardo DRS delivered record bookings with over $4 billion in contract awards, leading to a 1.3 book-to-bill ratio and 14% revenue growth in 2024.
Adjusted EBITDA and Margin Expansion
The company achieved 23% adjusted EBITDA growth with a 90 basis point margin expansion, reflecting strong program execution and operational leverage.
International Revenue Growth
International business grew to 13% of total revenue, marking the fourth consecutive year of increased international sales.
Investment in Future Growth
Leonardo DRS increased investment in R&D and CapEx by approximately 25% year over year, with plans to further increase in 2025.
Backlog and Future Outlook
The company ended 2024 with a record $8.5 billion backlog, providing visibility for continued growth and margin expansion into 2025.
New Capital Deployment Strategy
Leonardo DRS announced a balanced capital allocation approach, including a cash dividend of $0.09 per share and a $75 million share buyback authorization.
Lowlights
Integrated Mission Systems Segment Decline
Revenue in the Integrated Mission Systems segment was down 1% in Q4 due to program timing, although it saw 11% growth for the full year.
Potential Risks from New Administration Policies
Uncertainties around the new administration's strategic priorities and potential budget reallocations could impact future defense spending.
Material Supply Chain Challenges
Concerns about raw material supply, particularly germanium, due to export bans and pricing volatility, present potential risks.
Company Guidance
During the Leonardo DRS Fourth Quarter Fiscal Year 2024 Earnings Conference Call, the company provided guidance reflecting robust financial performance and strategic investments aimed at future growth. For fiscal year 2024, Leonardo DRS reported record bookings and a book-to-bill ratio of 1.3, with over $4 billion in contract awards. The company achieved mid-teens organic revenue growth of 14%, a 23% increase in adjusted EBITDA, and a 90 basis points expansion in margins, resulting in $981 million in revenue for the fourth quarter and $3.2 billion for the year. Free cash flow generation was $190 million, in line with the targeted conversion rate of approximately 80% of adjusted net earnings. Looking forward to 2025, Leonardo DRS anticipates revenue growth between 6% and 9%, with projected revenues ranging from $3.425 billion to $3.525 billion and adjusted EBITDA expected between $435 million and $455 million. The company plans to increase R&D and capital expenditures by approximately 25% year over year, focusing on areas such as advanced sensing, directed energy capabilities, and electric power and propulsion, supported by its strong backlog of $8.5 billion. Additionally, Leonardo DRS announced a new capital return program, including a cash dividend of $0.09 per share and a $75 million share buyback authorization over the next two years, highlighting a more balanced capital allocation strategy.Leonardo Drs Corporate Events
Stock BuybackDividendsFinancial Disclosures
Leonardo DRS Reports 14% Revenue Growth for 2024
Positive
Feb 20, 2025
Leonardo DRS announced its financial results for the fourth quarter and full year 2024, highlighting a 14% revenue growth for the year driven by key programs in advanced infrared sensing and tactical radars. The company also declared a dividend of $0.09 per share to be paid in March 2025 and authorized a $75 million stock repurchase program. These moves, alongside strong financial performance, signal the company’s stable financial health and commitment to shareholder value.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.