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Leonardo DRS (DRS)
NASDAQ:DRS
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Leonardo Drs
(NASDAQ:DRS)
Rating:71Outperform
Price Target:―
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
DRS's 1Q25 earnings beat marks a strong start to the year.
Strategic Opportunities
Golden Dome presents an opportunity for the company with competitive offerings in DRS's short-range air defense, OTH radar, and space-based sensing capabilities.
Negative Factors
Market Risks
China's ban on germanium export poses a risk to the weapon sights business, although DRS has several years worth of supply on hand.
Trading Volumes
Trading volumes remain low and upside shipbuilding opportunities might not be realized until the South Carolina facility is operational.
Valuation
At a ~21.5x EV/2026 EBITDA, DRS is currently trading at a ~3-turn premium to peers, presenting a more balanced risk-reward proposition.
Leonardo Drs (DRS) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$10.92B
Dividend Yield0.22%
Average Volume (3M)978.34K
Price to Earnings (P/E)47.1
Beta (1Y)1.08
Revenue Growth13.58%
EPS Growth25.96%
CountryUS
Employees7,000
SectorIndustrials
Sector Strength93
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.20
Shares Outstanding266,049,200
10 Day Avg. Volume928,761
30 Day Avg. Volume978,342
Financial Highlights & Ratios
PEG Ratio4.79
Price to Book (P/B)4.31
Price to Sales (P/S)0.00
P/FCF Ratio38.19
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$44.75Price Target Upside9.04% Upside
Rating ConsensusStrong 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 presents strong financial performance with significant revenue growth and stable profitability. The company's low debt levels, strong balance sheet, and excellent cash flow generation enhance its financial robustness. Monitoring liquidity and capital allocation can further consolidate its position.Income Statement
Leonardo DRS has shown strong revenue growth over recent years, with an increase from $2,778 million in 2020 to $3,345 million in TTM (Trailing-Twelve-Months). The gross profit margin has improved to 22.7%, reflecting efficient cost management. The EBIT margin is consistent at 9.3%, and the net profit margin is solid at 7.0%. These metrics indicate robust profitability and operational efficiency, making the income statement a strong point for the company.85
Very Positive
Balance Sheet
The company's balance sheet reveals a stable financial position with a debt-to-equity ratio of 0.14, indicating low leverage. The equity ratio stands at 62.8%, highlighting a strong equity base. The return on equity is healthy at 9.1%, showing effective use of shareholder funds. Overall, the balance sheet is solid, though there is room for improvement in liquidity and asset utilization.78
Positive
Cash Flow
Leonardo DRS demonstrates positive cash flow dynamics with a significant increase in free cash flow to $291 million in TTM. The operating cash flow to net income ratio is 1.70, indicating strong cash generation relative to earnings. The free cash flow growth rate is impressive, highlighting the company's ability to generate surplus cash even after capital expenditures. These factors contribute to a strong cash flow position.80
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 3.35B | 3.23B | 2.83B | 2.69B | 2.88B | 2.78B | Gross Profit |
| 758.00M | 736.00M | 648.00M | 575.00M | 547.00M | 494.00M | EBIT |
| 312.00M | 293.00M | 231.00M | 561.00M | 236.00M | 181.00M | EBITDA |
| 394.00M | 376.00M | 313.00M | 624.00M | 293.00M | 229.00M | Net Income Common Stockholders |
| 234.00M | 213.00M | 168.00M | 405.00M | 154.00M | 85.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 380.00M | 598.00M | 467.00M | 306.00M | 240.00M | 61.00M | Total Assets |
| 4.10B | 4.18B | 3.92B | 3.68B | 3.07B | 2.96B | Total Debt |
| 452.00M | 458.00M | 497.00M | 394.00M | 490.00M | 530.00M | Net Debt |
| 72.00M | -140.00M | 30.00M | 88.00M | 250.00M | 469.00M | Total Liabilities |
| 1.52B | 1.63B | 1.60B | 1.55B | 1.48B | 1.53B | Stockholders Equity |
| 2.57B | 2.56B | 2.33B | 2.13B | 1.59B | 1.43B |
| Cash Flow | Free Cash Flow | ||||
| 291.00M | 186.00M | 145.00M | -32.00M | 118.00M | 69.00M | Operating Cash Flow |
| 398.00M | 271.00M | 205.00M | 33.00M | 178.00M | 125.00M | Investing Cash Flow |
| -106.00M | -84.00M | -59.00M | 436.00M | 39.00M | -70.00M | Financing Cash Flow |
| -72.00M | -56.00M | 15.00M | -403.00M | -38.00M | -80.00M |
Leonardo Drs Technical Analysis
Positive
41.04
Price Trends
36.57
Positive
34.63
Positive
32.57
Positive
Market Momentum
1.35
Positive
61.12
Neutral
33.05
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 41.04 is above the 20-day moving average (MA) of 40.51, above the 50-day MA of 36.57, and above the 200-day MA of 32.57, indicating a bullish trend. The MACD of 1.35 indicates Positive momentum. The RSI at 61.12 is Neutral, neither overbought nor oversold. The STOCH value of 33.05 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 (65)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $10.92B | 37.99 | 28.24% | 0.81% | 9.87% | 14.16% | |
76 Outperform | $8.70B | 21.90 | 13.36% | ― | 22.29% | 51.90% | |
71 Outperform | $10.92B | 47.07 | 9.50% | 0.22% | 13.58% | 25.96% | |
71 Outperform | $8.82B | 16.20 | 12.27% | 2.36% | -1.04% | -21.80% | |
68 Neutral | $9.42B | 133.65 | ― | 16.92% | ― | ||
65 Neutral | $4.41B | 12.06 | 5.22% | 249.80% | 4.09% | -12.16% | |
56 Neutral | $11.73B | ― | -45.38% | ― | 64.98% | -10.52% |
* Industrials Sector Average
Performance Comparison
DRS
Leonardo Drs
41.04
17.38
73.46%
ERJ
Embraer SA
47.49
18.77
65.36%
HII
Huntington Ingalls
224.74
-21.93
-8.89%
BWXT
BWX Technologies
119.49
32.37
37.16%
RKLB
Rocket Lab USA
25.42
21.03
479.04%
SARO
StandardAero, Inc.
28.16
-4.81
-14.59%
Leonardo Drs Earnings Call Summary
Earnings Call Date:May 01, 2025
(Q1-2025)
| % Change Since: 11.28%|
Next Earnings Date:Jul 30, 2025
Earnings Call Sentiment Positive
Leonardo DRS reported strong Q1 performance with significant bookings, backlog growth, and strategic alignment with defense priorities. However, challenges related to supply chain disruptions and margin pressures in the ASC segment were noted. The overall business outlook remains positive, supported by robust demand and operational improvements.Q1-2025 Updates
Positive Updates
Strong Bookings and Backlog
Leonardo DRS secured nearly $1 billion in bookings in Q1, translating to a 1.2 book-to-bill ratio. The company achieved its 13th consecutive quarter with a book-to-bill above 1, increasing the backlog to $8.6 billion.
Remarkable Organic Growth
The company experienced organic growth of 16% in Q1, with profit expansion and improved cash flow, driven by material receipts pulled into the quarter.
Successful Capital Return Initiatives
Leonardo DRS commenced the execution of capital return initiatives with the payment of its first dividend and initial stock repurchases.
Advanced Infrared Sensing Demand
High demand was noted for advanced infrared sensing, electric power and propulsion, and tactical radars, contributing to the company's growth.
Positive Adjusted EBITDA Growth
Adjusted EBITDA in Q1 was $82 million, representing a 17% growth from last year.
Defense Budget Alignment
The company is well-aligned with U.S. defense priorities, particularly in shipbuilding, force protection, and the nuclear triad.
Negative Updates
Supply Chain Challenges
Challenges arose with a sole source optics supplier unable to execute on purchase orders due to China's restrictions on rare earth minerals, impacting profitability.
ASC Margin Pressure
ASC segment margin declined by 130 basis points due to negative contract adjustments and increased germanium costs.
International Program Supplier Issue
A supplier issue on an international program led to increased costs as Leonardo DRS sought alternative germanium sources.
Potential Tariff Impacts
The potential implications of tariffs were discussed, although the company expects relative insulation due to its U.S.-centric operations.
Company Guidance
During the Leonardo DRS First Quarter Fiscal Year 2025 Earnings Conference Call, the company reported strong financial performance, surpassing expectations with a 16% organic growth in revenue and adjusted EBITDA growth of 17%, reaching $82 million. The company's book-to-bill ratio was 1.2, with nearly $1 billion in bookings that increased the backlog to a record $8.6 billion. Leonardo DRS maintained its full-year guidance, projecting revenue between $3.45 billion and $3.525 billion, with an adjusted EBITDA forecast of $435 million to $455 million and adjusted diluted EPS in the range of $1.02 to $1.08. The company highlighted its diversified portfolio, strong demand across its segments, and ongoing capital return initiatives, including dividends and stock repurchases. Despite a dynamic operating environment and challenges such as increased germanium costs, the company expressed confidence in its ability to achieve its 2025 outlook, supported by a robust defense budget and strategic alignment with national defense priorities.Leonardo Drs Corporate Events
Financial Disclosures
Leonardo DRS Reports Strong Q1 2025 Financial Results
Positive
May 1, 2025
Leonardo DRS reported strong financial results for the first quarter of 2025, ending March 31, with a 16% increase in revenue to $799 million and a 72% rise in net earnings to $50 million compared to the previous year. The company also achieved a book-to-bill ratio of 1.2x with $1 billion in bookings and an $8.6 billion backlog, reflecting robust demand for its products and services. The improved profitability and reduced cash flow usage indicate a solid start to the year, positioning the company well for future growth and shareholder returns.
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.