Dj Officer Fasano Gifts 500 Of Leidos Holdings Inc >Ldos

An ill-informed investor can lose cash if he wagers on a stock only based on the numbers flashing on a real-time stock screen. A critical analysis of a company’s financial background is a must for a better investment decision, especially at a time when the stock market is juggling myriad issues.

Often, investors evaluate a company’s performance by simply looking at its sales and earnings, which sometimes do not reveal the real picture. To be more precise, they do not tell whether a company’s fundamentals are sound enough to meet its financial obligations. Here, the coverage ratio comes into play — the higher the metric, the more efficient an enterprise will be in meeting its financial obligations.

Sterling Infrastructure, Inc. STRL, Leidos Holdings, Inc. LDOS, Tenet Healthcare Corporation THC and Amazon.com, Inc. AMZN boast an impressive interest coverage ratio.

Why Interest Coverage Ratio?

The interest coverage ratio is used to determine how effectively a company can pay interest charges on its debt.

Debt, which is crucial to financing operations for the majority of companies, comes at a cost called interest. Interest expense has a direct bearing on the profitability of a company. The company’s creditworthiness depends on how effectively it meets its interest obligations. Therefore, interest coverage ratio is one of the important criteria to factor in before making any investment decision.

Interest Coverage Ratio = Earnings before Interest & Taxes (EBIT) divided by Interest Expense.

Interest coverage ratio suggests how many times the interest could be paid from earnings and gauges the margin of safety a firm has for paying interest.

An interest coverage ratio lower than 1 suggests that the company is unable to fulfill its interest obligations and could default on repaying debt. A company capable of generating earnings well above its interest expense can withstand financial hardships. One should also track the company’s past performance to determine whether the interest coverage ratio has improved or worsened over a period of time.

The Winning Strategy

Apart from having an interest coverage ratio that is more than the industry average, adding a favorable Zacks Rank and a VGM Score of A or B to your search criteria should lead to better results.

Interest coverage ratio greater than X-Industry Median

Price greater than or equal to 5: The stocks must all be trading at a minimum of $5 or higher.

5-Year Historical EPS Growth (%) greater than X-Industry Median: Stocks with a strong EPS growth history.

Projected EPS Growth (%) greater than X-Industry Median: This is the projected EPS growth over the next three to five years. This shows that the stock has near-term earnings growth potential.

Average 20-Day Volume greater than 100,000: A substantial trading volume ensures that the stock is easily tradable.

Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.

VGM Score of less than or equal to B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.

Here are four of the 18 stocks that qualified the screening:

Sterling Infrastructure, which is engaged in e-infrastructure, transportation and building solutions, sports a Zacks Rank #1 and has a VGM Score of B. Sterling Infrastructure has a trailing four-quarter earnings surprise of 21.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sterling Infrastructure’s current financial year sales and EPS suggests growth of 9% and 33.3%, respectively, from a year ago. The stock has surged 185.9% in the past year.

Leidos Holdings, which provides services and solutions in the defense, intelligence, civil and health markets in the United States and internationally, has a VGM Score of A and carries a Zacks Rank #1.

The Zacks Consensus Estimate for Leidos Holdings’ current financial year sales and EPS suggests growth of 6% and 33.6%, respectively, from a year ago. Leidos Holdings has a trailing four-quarter earnings surprise of 29.9%, on average. The stock has risen 91.8% in the past year.

Tenet Healthcare, a diversified healthcare services company in the United States, sports a Zacks Rank #1 and has a VGM Score of A.

The Zacks Consensus Estimate for Tenet Healthcare’s current financial year sales and EPS suggests growth of 1% and 63.2%, respectively, from a year ago. THC has a trailing four-quarter earnings surprise of 59.9%, on average. The stock has skyrocketed 180.9% in the past year.

Amazon, a multinational technology company focusing on e-commerce, cloud computing, online advertising, digital streaming and artificial intelligence, has a Zacks Rank #2 and a VGM Score of B.

The Zacks Consensus Estimate for Amazon’s current financial year sales and EPS suggests growth of 10.8% and 78.3%, respectively, from the year-ago period’s levels. AMZN has a trailing four-quarter earnings surprise of 25.9%, on average. The stock has surged 43.3% in the past year.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

Zacks Investment Research

Intuitive Machines, Inc. LUNR is slated to report third-quarter 2024 results on Nov. 14, before market open.

See the Zacks Earnings Calendar to stay ahead of market-making news.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $52.4 million, implying 311.4% growth from the year-ago quarter's reported figure. The consensus mark for third-quarter earnings is pegged at a loss of 13 cents per share, suggesting an improvement from a loss of 22 cents in the prior-year quarter. The bottom-line estimate has remained unchanged in the past 60 days.

LUNR does not boast a very impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in the last reported quarter, with a surprise of 64.29%. LUNR has a trailing four-quarter average negative earnings surprise of 15.18%.

Earnings Whisper for LUNR Stock

Our proven model does not conclusively predict an earnings beat for LUNR this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

LUNR has a Zacks Rank #3 and an Earnings ESP of 0.00% at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

LUNR’s Q3 Results: Key Factors to Consider

During the to-be-reported quarter, Intuitive Machines secured a handful of notable contracts, which can be expected to have boosted its order book and, thereby, the backlog count. This should get reflected in LUNR’s upcoming quarterly results.

Evidently, in September 2024, LUNR won a contract from NASA for communication and navigation services for missions in the near space region, which extends from Earth’s surface to beyond the Moon. The contract has a maximum potential value of $4.82 billion.

In August, the company clinched a $116.9 million NASA contract to deliver six science and technology payloads, including one European Space Agency-led drill suite, to the Moon’s South Pole.

Notably, NASA and other commercial payload contracts associated with the IM-1, IM-2 and IM-3 lunar payload missions, clinched by LUNR in the previous quarters, can be expected to have bolstered its revenues in the third quarter.

Also, the OMES III contract, for which the company provides engineering services to the Landsat Servicing mission at the Goddard Space Flight Center in Maryland, is likely to have aided its overall quarterly top-line performance.

On the cost front, higher cost of revenues and general and administrative expenses, due to growth in LUNR’s business operations, might have had some negative impact on its earnings performance.

Nevertheless, solid revenue expectations and profit margin earned from business growth are likely to have bolstered the company’s overall bottom line in the third quarter.

Price Performance & Valuation

Intuitive Machines' shares have surged a massive 330.5% in the year-to-date period against the Zacks Aerospace-Defense industry’s decline of 3.9%. It has also outperformed the broader Zacks Aerospace sector’s growth of 4.3% and the S&P 500’s surge of 26.1% during the same period.

YTD Performance

Other defense players such as Leidos Holdings LDOS, TransDigm Group TDG and Lockheed Martin LMT have also delivered a stellar performance, with their shares surging 86.1%, 35.9% and 25.9%, respectively, year to date.

Regarding valuation, LUNR’s forward 12-month price-to-sales (P/S) is 4.63X, a premium to its peer group’s average of 2.90X. This suggests that investors will be paying a higher price than the company's expected sales growth compared to that of its peers.

LUNR’s Price/Sales Ratio (F12M)

Investment Thesis

With the market for space exploration exhibiting solid growth trends in recent times, backed by investments from both private companies and governments, stocks like LUNR are rallying high. Notably, in 2024, Intuitive Machines successfully landed its Nova-C class lunar lander, Odysseus, on the Moon, returning the United States to the lunar surface for the first time since 1972. Such achievements surely boost investors’ confidence in this stock, which must have been duly reflected in its impressive year-to-date share price performance.

However, the company is still in the preliminary stages of developing its full space infrastructure. If it fails to demonstrate the reliability of its products and services through a successful lunar landing or delays completing specific space missions, its results of operations might suffer.

Moreover, the company’s Return on Invested Capital (“ROIC”) was lower than that of its industry. This indicates that LUNR is not effectively earning profits from its invested capital compared to its industry.

LUNR Stock’s ROIC

Final Thoughts

Investors interested in LUNR stock should wait for a better entry point until next Thursday, considering its premium valuation and poor ROIC. However, those who already own it may continue to do so, considering its impressive year-to-date price performance and favorable Zacks Rank.

Zacks Investment Research