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Leonardo DRS (DRS)
NASDAQ:DRS
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Leonardo Drs
(NASDAQ:DRS)
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Rating:76Outperform
Price Target:
$48.00
▲(11.94% Upside)
Leonardo DRS's strong financial performance and positive earnings call sentiment are the primary drivers of its stock score. While technical indicators suggest a neutral trend, the high P/E ratio and low dividend yield weigh on the valuation. The company's growth prospects in the defense sector are promising, but supply chain challenges and trade risks are potential headwinds.
Positive Factors
Revenue Growth
The increased revenue growth expectations indicate strong demand and effective market positioning, supporting long-term business expansion and stability.
Strong Bookings and Backlog
A robust backlog and strong bookings reflect sustained demand and provide revenue visibility, underpinning future financial performance and strategic planning.
Positive Defense Funding Environment
Increased defense funding offers growth opportunities, enhancing Leonardo DRS's ability to secure new contracts and expand its market share in the defense sector.
Negative Factors
Germanium Supply Chain Challenges
Supply chain constraints for germanium could impact production costs and delivery timelines, potentially affecting profitability and operational efficiency.
Tariff and Trade Risks
Trade risks could lead to increased costs and supply disruptions, impacting the company's ability to maintain competitive pricing and stable supply chains.
M&A Market Pressures
Rising acquisition costs may limit strategic growth through M&A, affecting the company's ability to expand its capabilities and market presence efficiently.
Leonardo Drs (DRS) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$11.03B
Dividend Yield0.63%
Average Volume (3M)977.88K
Price to Earnings (P/E)44.5
Beta (1Y)1.07
Revenue Growth11.43%
EPS Growth32.31%
CountryUS
Employees7,000
SectorIndustrials
Sector Strength72
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.23
Shares Outstanding266,123,630
10 Day Avg. Volume1,044,615
30 Day Avg. Volume977,878
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market Cap1.15
Enterprise Value/Revenue3.71
Enterprise Value/Gross Profit16.03
Enterprise Value/Ebitda31.04
Forecast
1Y Price Target
$49.00Price Target Upside14.27% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering9
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, providing systems and solutions to the U.S. Department of Defense and allied nations. Key revenue streams include the sale of defense electronics, logistics support, and integrated systems that enhance military capabilities. Additionally, the company engages in partnerships with other defense contractors and technology firms to develop joint solutions, which can expand its market reach and enhance the value of its offerings. Contracts often include multi-year agreements, allowing for a stable revenue flow, while ongoing maintenance and support services contribute to recurring income.
Leonardo Drs Earnings Call Summary
Earnings Call Date:Jul 30, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Oct 30, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance with significant revenue and profitability growth, driven by robust bookings and backlog. The positive defense funding environment provides additional opportunities for growth. However, challenges such as germanium supply constraints and trade risks present potential headwinds. Overall, the positive aspects outweigh the challenges.Q2-2025 Updates
Positive Updates
Strong Bookings and Backlog Growth
Secured $853 million in bookings with a 1.0 book-to-bill ratio for the quarter, and a total backlog of $8.6 billion, which is a 9% year-over-year increase.
Increased Revenue Growth Expectations
Increased full-year revenue growth expectations to 9% to 11%, with solid double-digit organic revenue growth.
Profitability and Margin Expansion
Adjusted EBITDA increased by 17%, margin expanded by 70 basis points, and adjusted diluted EPS was up 28%.
Positive Defense Funding Environment
New legislation includes $150 billion in defense funding with $113 billion front-loaded into FY '26, representing significant opportunities for Leonardo DRS, Inc.
Strong Performance in Electric Power and Propulsion
The electric power and propulsion segment continues to perform exceptionally well, contributing to top-line growth and margin expansion.
Negative Updates
Germanium Supply Chain Challenges
Export restrictions have constrained the global supply of germanium, impacting raw material costs and potentially affecting timely product deliveries.
Tariff and Trade Risks
Potential for retaliatory trade restrictions on critical minerals due to the expiration of a temporary tariff reprieve.
M&A Market Pressures
High interest in the sector has driven up prices, impacting M&A activities and financial criteria for potential acquisitions.
Company Guidance
During the call, Leonardo DRS, Inc. provided guidance for the full fiscal year 2025, anticipating revenue growth between 9% and 11%, translating to a range of $3.525 to $3.6 billion. The company reported a book-to-bill ratio greater than 1.0 for the quarter, with $853 million in bookings and a total backlog of $8.6 billion, marking a 9% year-over-year increase. Adjusted EBITDA for the second quarter rose by 17% to $96 million, with a margin expansion of 70 basis points to 11.6%. Adjusted diluted EPS increased by 28% to $0.23. The company remains focused on executing its strategy amid a complex macro environment, with plans to mitigate germanium supply chain issues by 2026. Additionally, Leonardo DRS, Inc. expects opportunities from the newly enacted One Big Beautiful Bill Act, which includes $150 billion in defense funding, potentially benefiting from initiatives such as shipbuilding and missile defense. The company also noted international sales growth driven by NATO commitments and ongoing geopolitical tensions.Leonardo Drs Financial Statement Overview
Summary
Leonardo DRS demonstrates strong financial performance with robust revenue growth, healthy profit margins, and effective cost management. The balance sheet shows low leverage and strong equity, while cash flows are solid, indicating efficient cash management.Income Statement
Leonardo DRS shows strong revenue growth with a TTM (Trailing-Twelve-Months) increase of 5.8% compared to previous annual data. Gross profit margin and net profit margin are healthy, indicating effective cost management and profitability. The EBIT margin and EBITDA margin are also robust, further supporting financial health and operational efficiency.85
Very Positive
Balance Sheet
The balance sheet reflects solid equity, with a debt-to-equity ratio of 0.14, indicating low financial leverage and a strong equity position. The return on equity is commendable, showcasing effective use of shareholders' funds. The equity ratio suggests a stable asset base, though there is room for improvement in asset efficiency.78
Positive
Cash Flow
Leonardo DRS demonstrates solid cash flow management with a significant increase in free cash flow over the TTM period. The operating cash flow to net income ratio is favorable, highlighting strong cash generation from operations. Free cash flow to net income ratio is healthy, indicating good cash conversion efficiency.80
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 3.42B | 3.23B | 2.83B | 2.69B | 2.88B | 2.78B |
| Gross Profit | 792.00M | 736.00M | 648.00M | 575.00M | 547.00M | 494.00M |
| EBITDA | 409.00M | 376.00M | 313.00M | 624.00M | 293.00M | 229.00M |
| Net Income | 250.00M | 213.00M | 168.00M | 405.00M | 154.00M | 85.00M |
Balance Sheet | ||||||
| Total Assets | 4.08B | 4.18B | 3.92B | 3.68B | 3.07B | 2.96B |
| Cash, Cash Equivalents and Short-Term Investments | 278.00M | 598.00M | 467.00M | 306.00M | 240.00M | 61.00M |
| Total Debt | 472.00M | 458.00M | 497.00M | 487.00M | 490.00M | 530.00M |
| Total Liabilities | 1.48B | 1.63B | 1.60B | 1.55B | 1.48B | 1.53B |
| Stockholders Equity | 2.60B | 2.56B | 2.33B | 2.13B | 1.59B | 1.43B |
Cash Flow | ||||||
| Free Cash Flow | 235.00M | 186.00M | 145.00M | -32.00M | 118.00M | 69.00M |
| Operating Cash Flow | 336.00M | 271.00M | 205.00M | 33.00M | 178.00M | 125.00M |
| Investing Cash Flow | -100.00M | -84.00M | -59.00M | 436.00M | 39.00M | -70.00M |
| Financing Cash Flow | -107.00M | -56.00M | 15.00M | -403.00M | -38.00M | -80.00M |
Leonardo Drs Technical Analysis
Positive
42.88
Price Trends
43.07
Negative
43.16
Negative
38.22
Positive
Market Momentum
-0.10
Negative
55.67
Neutral
79.32
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 42.88 is above the 20-day moving average (MA) of 41.67, below the 50-day MA of 43.07, and above the 200-day MA of 38.22, indicating a neutral trend. The MACD of -0.10 indicates Negative momentum. The RSI at 55.67 is Neutral, neither overbought nor oversold. The STOCH value of 79.32 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 (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | 6.35B | 29.83 | 10.89% | 0.57% | 4.77% | 4.50% | |
77 Outperform | 10.84B | 20.61 | 10.75% | 1.96% | -1.75% | -29.19% | |
76 Outperform | $11.03B | 44.54 | 9.99% | 0.63% | 11.43% | 32.31% | |
71 Outperform | 14.88B | 18.92 | 10.98% | 0.10% | 1.19% | -6.77% | |
70 Outperform | 16.29B | 54.44 | 24.86% | 0.56% | 10.13% | 10.04% | |
68 Neutral | 13.63B | 866.09 | 0.74% | ― | 7.76% | 40.33% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
Performance Comparison
DRS
Leonardo Drs
42.88
14.51
51.15%
HII
Huntington Ingalls
276.16
14.79
5.66%
KTOS
Kratos Defense
80.72
57.17
242.76%
MOG.A
Moog
200.11
-0.60
-0.30%
TXT
Textron
83.49
-3.31
-3.81%
BWXT
BWX Technologies
178.19
73.43
70.09%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.