William L. Moore
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Citi Resumes Coverage Of Leidos At Buy, Lifts Price Target To $47

Citi resumed coverage of Leidos Holdings, Inc.  with a Buy rating as EPS growth is expected to accelerate to high-single digits by 2018 on modest sales growth, margin expansion and de-levering.

The IS&GS deal provides Leidos sales and margin growth opportunities as it diversifies the portfolio while expanding the company's reach into various end-markets.

"[A]lthough LDOS spent its dry powder on Lockheed Martin Corporation, the stock's cheap & yields >3%, among the highest in all A&D. And hitting management's 2019 targets could eventually support a ~$55 stock," analyst Jonathan Raviv wrote in a note.

However, the analyst said it's still a low-growth market with Leidos aiming to take market share at a targeted 3 percent average annual organic growth in 2016-19 driven by the newly combined capabilities as well as new investments yielding sales synergies.

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