On Thursday, Truist Securities updated its outlook on shares of Leonardo DRS (NASDAQ:DRS), raising the price target to $36 from the previous $32, while maintaining a Buy rating on the stock. The firm's analyst cited a robust third-quarter performance by the defense contractor, which not only beat expectations but also raised its guidance. The analyst's optimism is further bolstered by a positive forecast for 2025, indicating continued revenue growth.
Leonardo DRS reported a 12% revenue increase in 2024 and anticipates a midpoint revenue growth of 6.5% for 2025. These figures surpass the management’s projected three-year compound annual growth rate (CAGR) of 4-7%. The analyst believes that this momentum could result in a 2026 revenue base nearing $3.7 billion, which is higher than the current market consensus of $3.58 billion.
The company's success is partly attributed to the progress of the Columbia class submarine program, which is contributing to margin growth in its Integrated Mission Systems (IMS) segment. Moreover, there is a rising demand for tactical radars and force protection systems, driving organic growth acceleration for Leonardo DRS.
The defense contractor's recent performance and future projections have instilled confidence in Truist Securities, prompting the firm to raise its price target. The positive outlook reflects expectations of sustained growth and market performance for Leonardo DRS in the upcoming years.
InvestingPro Insights
Leonardo DRS's recent performance aligns with the positive outlook presented by Truist Securities. According to InvestingPro data, the company's revenue growth stands at 16.88% over the last twelve months as of Q3 2024, surpassing the 12% increase mentioned in the article. This robust growth is reflected in the stock's impressive year-to-date price total return of 57.88%, indicating strong investor confidence.
The company's market capitalization of $8.34 billion and a P/E ratio of 38.59 suggest that investors are pricing in significant future growth potential. This valuation is supported by an InvestingPro Tip highlighting that Leonardo DRS's earnings per share have shown strong growth recently, which aligns with the analyst's positive forecast for 2025 and beyond.
Another relevant InvestingPro Tip notes that the company has a high return on invested capital, which could be indicative of its efficient capital allocation in programs like the Columbia class submarine and tactical radars mentioned in the article.
For readers interested in a deeper analysis, InvestingPro offers 12 additional tips for Leonardo DRS, providing a comprehensive view of the company's financial health and market position.
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