May 1, 2024

Shares of Leonardo DRS (DRS) are trading down today despite Q1 results that came in ahead of expectations across the company as a whole, but with results in the legacy Advanced Sensing & Computing (ASC) segment just coming in as expected. It was the Integrated Mission Systems (IMS), which includes electric power and propulsion, doing the heavy lifting.

Leonardo DRS (DRS) Reports

Revenue was up 21% to $688 million, beating by 6.6% ($42.4 million), while EPS of $0.14 doubled from Q1 last year and beat by $0.02.

Guidance for the rest of the year didn’t change even though total backlog grew to a record $7.8 billion. The high end of guidance suggests only 3.5% growth for the remainder of the year, which seems like a very easy target.

With DRS stock digesting this report today and looking somewhat prone to breaking below support around 20, I’m moving to hold. The stock is trading right at our entry price so we’re in “fine” shape, just trying to sort out whether to keep it or move on. Will give it a day or two to show us what it can do. HOLD

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Tyler Laundon

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.