A diversified portfolio is often cited as a key investment strategy. For global science and technology company Leidos (LDOS) it is a rule to operate by. The government services company’s portfolio spans everything from hypersonic missiles to cybersecurity to drones to cloud services to airport security and too many other divisions to mention.
But it is its healthcare division that is currently making waves. According to William Blair analyst Louie DiPalma, Leidos subsidiary — the Leidos Biomedical Research (LBR) — has been awarded three federal contracts from the National Institutes of Health’s (NIH) Division of Clinical Research (DCR) and Division of Microbiology and Infectious Diseases (DMID) concerning the search for a vaccine for COVID-19 and COVID-19 diagnostics.
The largest is a $34 million contract for “A randomized blinded controlled trial of the safety and efficacy of investigational therapeutics for the treatment of COVID-19 (2,000 subjects).”
Another $5 million contract is “On behalf of the DCR to facilitate the conduct of an observational study to characterize patients with COVID-19 infection (10,000 subjects).”
And a further $7 million contract to “Initiate the management, oversight, and conduct of the NIAID DMID clinical trial with the title of ‘A Multicenter, Adaptive, Randomized Blinded Controlled Trial of the Safety and Efficacy of Investigational Therapeutics for the Treatment of COVID-19.”
Although it only makes up 18% of Leidos’s $13 billion annual revenue, its health services division has a stellar reputation, with the Leidos Biomedical Research in charge of the NIH’s Frederick National Laboratory for Cancer Research.
DiPalma commented, “While these specific contracts are not large enough to be needle-movers, we believe they are a prelude of things to come. We anticipate there will be other significantly larger health surveillance and operations contracts over the next several years as the United States fortifies its health defense infrastructure… These contracts reflect Leidos’s diversification, which should allow the company to continue to excel even if there is a shift in focus from defense to healthcare in a future political administration.”
Accordingly, DiPalma reiterated an Outperform on Leidos without suggesting a price target. (To watch DiPalma’s track record, click here)
Overall, the government contracting giant is without question a Wall Street favorite, considering TipRanks analytics indicate LDOS as a Strong Buy. Out of 12 analysts tracked by TipRanks in the last 3 months, 9 are bullish on Leidos shares, while 3 remain sidelined. With a return potential of nearly 28%, the stock’s consensus target price stands at $118.09. (See Leidos stock analysis on TipRanks)
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