Key Takeaways
- Leonardo DRS (DRS) jumped 12% on Thursday after third-quarter bookings of $1.6 billion, its best since going public.
- Orders are outrunning sales, and funded backlog hit a record $5.6 billion.
- Management raised its 2026 adjusted EPS guidance to $1.50 to $1.53, from $1.34 to $1.39, with some help from a lower tax rate.
Leonardo DRS stock jumped 12% on Thursday to close at $39.64, after a third quarter in which orders came in far faster than it could ship them.
CEO John Baylouny said the quarter’s bookings and book-to-bill ratio were both “our strongest since becoming a public company four years ago,” in the company’s third-quarter release.
And the Navy’s spending is showing up elsewhere. Huntington Ingalls Industries (HII) beat the same morning on submarine and carrier work. General Dynamics (GD), whose Electric Boat yard buys Leonardo DRS’s Columbia-class propulsion systems, reports Friday morning.
Orders Are Outrunning Sales
Here’s the quarter, by the numbers:
- Revenue: $1.07 billion, up 11%, against $1.03 billion expected
- Adjusted EPS: $0.46, up 59%, against $0.35 expected
- Bookings: $1.6 billion, a 1.5x book-to-bill
- Funded backlog: a record $5.6 billion, up 21%
Analysts already expected sales to keep climbing through 2028.
That’s about 7% growth in 2027. On the Q3 2026 earnings call, CFO Mike Dippold said 2027 should grow at a low double-digit rate, including the pending Raft acquisition, which he expects to add 2 to 3 points. Even without Raft, that’s at least the 7% analysts expect, and he said he’s optimistic about beating DRS’s own growth framework.
Management raised its 2026 adjusted EPS guidance to $1.50 to $1.53, from $1.34 to $1.39. A lower tax rate helps there. DRS now assumes 13% for the full year, but its fourth quarter implies about 19%, a rate Dippold called more representative of a normal year.
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The Navy’s Money Is Reaching the Whole Supply Chain
Huntington Ingalls, up 13% on Thursday, tells the same story. Its revenue rose 11% to $3.5 billion, led by an 18% jump at its Newport News yard on submarines and carriers. It also raised its 2026 shipbuilding revenue guidance to $10.5 billion to $10.7 billion. CEO Chris Kastner said the quarter’s $32.4 billion of awards have “secured approximately 90 percent of our expected shipbuilding revenue through 2030.”
Leonardo DRS is also taking its propulsion work beyond Columbia. During the third quarter, it won the electric propulsion system for South Korea’s KDDX destroyer, which will be the Korean navy’s first full-electric-drive surface combatant. DRS already supplies hybrid drives for 20 of its frigates.
That brings in General Dynamics, up 5% on Thursday. Its Marine Systems revenue grew 10.4% in the second quarter, with operating earnings up 17.5%. With its suppliers booking orders this fast, the question for Friday morning is whether Marine Systems speeds up too.
Still Cheaper Than Usual
Before the report, Leonardo DRS traded at 26x forward earnings, under its three-year average of 32x.
At Thursday’s close, it’s about 29x, still under that average.
Record orders, a raised outlook and a CFO already pointing to 2027 growth above what analysts expect earn the jump, and the stock still trades below its own average. Some of this year’s EPS lift comes from taxes, though. At a 19% rate instead of 13%, next year loses part of that help, and Dippold expects 2027 margin gains to be smaller than this year’s. Cash is the other number to watch: third-quarter free cash flow fell to $61 million from $77 million, though it beat management’s own plan, and DRS still expects the fourth quarter to be its strongest for cash.
So What Is Leonardo DRS Stock Actually Worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
