Have you been paying attention to shares of Leidos (LDOS)? Shares have been on the move with the stock up 8.7% over the past month. The stock hit a new 52-week high of $170.08 in the previous session. Leidos has gained 54.9% since the start of the year compared to the 2.9% move for the Zacks Aerospace sector and the -5% return for the Zacks Aerospace - Defense industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 30, 2024, Leidos reported EPS of $2.63 versus consensus estimate of $2.26 while it beat the consensus revenue estimate by 2.23%.

For the current fiscal year, Leidos is expected to post earnings of $8.96 per share on $16.27 billion in revenues. This represents a 22.74% change in EPS on a 5.39% change in revenues. For the next fiscal year, the company is expected to earn $9.42 per share on $16.97 billion in revenues. This represents a year-over-year change of 5.18% and 4.32%, respectively.

Valuation Metrics

Leidos may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Leidos has a Value Score of B. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 18.7X current fiscal year EPS estimates, which is not in-line with the peer industry average of 21X. On a trailing cash flow basis, the stock currently trades at 11.9X versus its peer group's average of 17.4X. Additionally, the stock has a PEG ratio of 1.5. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Leidos currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Leidos meets the list of requirements. Thus, it seems as though Leidos shares could have a bit more room to run in the near term.

How Does LDOS Stack Up to the Competition?

Shares of LDOS have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Northrop Grumman Corporation (NOC). NOC has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of C.

Earnings were strong last quarter. Northrop Grumman Corporation beat our consensus estimate by 6.89%, and for the current fiscal year, NOC is expected to post earnings of $25.16 per share on revenue of $41.4 billion.

Shares of Northrop Grumman Corporation have gained 1.2% over the past month, and currently trade at a forward P/E of 20.95X and a P/CF of 16.21X.

The Aerospace - Defense industry is in the top 22% of all the industries we have in our universe, so it looks like there are some nice tailwinds for LDOS and NOC, even beyond their own solid fundamental situation.

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