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Leidos & 3 Contractors Win $480M Deal to Curb Drug Traffic


Leidos Holdings, Inc. LDOS, a renowned technology services and solutions provider, was among other three contractors that recently won a contract for offering technical solutions to the U.S. Department of Defense Counter-Narcoterrorism Technology Program Office (CNTPO). Valued at $480 million, the contract was awarded by the U.S. Army Space and Missile Defense Command.

What’s CNTPO?

The CNTPO is the leading developer of inter-agency and multinational operations to disrupt, deter and deny narcoterrorist activities so as to reduce trafficking of illegal narcotics and materials that support global terrorist activities.

Details of the Contract

As per the terms of the contract, Leidos will provide technical solutions and mission support for command, control, communications, information, detection and monitoring technology and systems in order to counter national security threats posed by drug trafficking, piracy and transnational organized crime. These solutions will also bring down finance networks related to illicit drug trafficking activities. The contract is expected to allow the CNTPO to limit, if not completely stop, international drug trafficking.

Our View

In the second quarter of 2016, Leidos recorded a 4% year-over-year increase in revenues to $915 million at the National Security Solutions (NSS) business segment. Segment bookings amounted to $520 million. For the third quarter, management forecasts an increase in bookings on the back of several anticipated award decisions, as well as typical seasonality at the end of the government fiscal year.

Being a prominent provider of advanced technical solutions in a number of markets including defense, intelligence, homeland security, civil, and health, surely the latest contract will boost the company’s NSS segment.

Meanwhile, in a bid to strengthen its technical services solutions, Leidos completed its merger with defense giant Lockheed Martin Corp.’s LMT Information Systems & Global Solutions business (IS&GS) last month. This combination is expected to have brought together a $10 billion portfolio of solutions, mission IT, and technical services under Leidos’ control, to which the aforementioned contract seems like a meaningful upgrade.

Zacks Rank & Stocks to Consider

Leidos Holdings currently carries a Zacks Rank #2 (Buy), while Lockheed Martin has a Zacks Rank #4 (Sell). A few favorably placed stocks in the aerospace and defense sector include Engility Holdings, Inc. EGL and Ducommun Inc. DCO, both of which sport a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

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