DRS Stock Forecast & Price Target

Leonardo DRS Inc. demonstrated significant financial strength with total bookings reaching $1.3 billion, leading to a year-to-date book-to-bill ratio of 1.4x and a total backlog of $8.9 billion, reflecting a year-over-year increase of 7.8%. The Integrated Mission Systems (IMS) segment exhibited robust growth, with a notable 34% increase in topline revenue to $383 million, driven by high demand for counter-unmanned aerial systems and steady contributions from the Columbia Class submarine program. Furthermore, the company's EBITDA margins improved by 120 basis points year-over-year, supported by operational efficiencies and enhanced profitability in the Electric Power and Propulsion segment, indicating a healthy upward trajectory for the business.

Leonardo DRS has encountered a negative outlook primarily due to a decline in consolidated adjusted EBITDA margins, which fell 10 basis points year-over-year to 12.2%, largely impacted by increased research and development (R&D) expenditures and less efficient program execution. Additionally, the Advanced Sensing and Computing segment experienced a 100 basis point decrease in adjusted EBITDA margins to 11%, driven by elevated R&D investments that contributed to a significant drag on profitability. The ongoing challenges with the Germanium supply chain further compound these issues, as the company attempts to mitigate dependency on external sources while facing headwinds from both margins and operational efficiency.