Defense,
intelligence and civilian agencies are accelerating modernization efforts in
2020. M&A activity in the market will also remain at a brisk pace.
“Leidos released
its 4Q19 and 2019 fiscal results on Feb. 18, posting 4Q19 revenue growth
of 11.6% year-to-year to $2.95 billion on the back of strong bookings and
backlog growth throughout 2019 as well as several recent large-scale contract
wins and successful award rebids that are converting to revenue at a vigorous
pace,” said Senior Analyst John Caucis. “Growth
with classified customers in the Intelligence Community (IC) also remains
strong. Leidos surpassed its guidance for 2019 revenue of between $10.9 billion
and $11 billion, with full-year sales of $11.1 billion, an increase of 8.8%
over 2018. Leidos’ guidance for 2020 calls for full-year sales between $12.6
billion and $13 billion, implying growth over 2019 of 13.6% to 17.2%, largely
driven by recent strategic acquisitions. For example, Leidos spent over
$2.5 billion to acquire Dynetics in December and L3Harris Technologies’
Security Detection and Automation division in February, expanding its footprint
in defense technologies, airport and critical infrastructure screening
products, automated tray return systems, and industrial automation systems.”
According to Research
Analyst Brian Baker, “ManTech’s
revenue rose 21.6% year-to-year to $604.4 million in 4Q19. Growth was augmented
by acquisitions of Kforce Government Solutions, which closed in April, and H2M
Group, which closed in August, as both contributed inorganic revenue to
ManTech’s top line in 4Q19. Classified customers continue to accelerate spend
with ManTech, while spending on behalf of ManTech’s principal Department of
Defense and IC clients continues trending upward, in addition to significant
wins with federal civilian and health agencies, leading to impressive 15%
organic growth in 4Q19 and 9% organic growth for 2019. Robust revenue
expansion, strong cash generation and stable margin performance enable ManTech
to continue with its aggressive M&A strategy to enhance access to
high-growth and high-value markets, similar to tactics of peers CACI, Leidos
and SAIC.”
Additional
assessments publishing this week from our analyst teams
Forging partnerships with larger-scale technology vendors enables
vendors to more quickly enhance portfolios and incorporate emerging
technologies while also strengthening scale to pursue opportunities outside their
existing markets.
”Quantum computing, the edge, AI and cybersecurity are some
of the latest investment areas in which Atos
is developing pointed solutions to differentiate between a typical blue-sky
consultancy approach and its approach of a technology-enabled organization.
Enhancing its cloud capabilities, such as around Google Cloud solutions through the launch of Workplace as a Service
Google Edition and the acquisition of Maven Wave, and the launch of the Digital
Hybrid Cloud offering jointly with VMware,
creates cloud professional services opportunities that will sustain Atos’ cloud
revenue growth in the coming quarters.” — Senior Analyst
Elitsa Bakalova
“CGI is pursuing a strategic growth
objective to double its revenue base over the next several years with
accelerated investments in M&A and homegrown IP. However, the company must
continue to execute on its expense management strategy as margins face pressure
in the near term with the ramped-up acquisition pace and ongoing organizational
restructuring.” — Research
Analyst John Croll
“Refreshing
its business image to position as a digital transformation company and better
align with client demand for emerging technologies,
such as security, IoT and AI capabilities, will provide growth opportunities
for Fujitsu’s services business if
the company is able to successfully build out its global presence and talent
bench to support new portfolio areas. While the company has expanded its global
network, adding new delivery and innovation centers that increase client
awareness of the brand and offerings, the company is unable to generate
sustainable and consistent growth outside Japan. Bolstering portfolio
innovation efforts through solution codevelopment partnerships will help Fujitsu scale its new portfolio and
generate new opportunities, but the company needs to maintain differentiation
within its portfolio to successfully capitalize on potential opportunities
around emerging technologies.” — Analyst Kelly Lesiczka
“Amazon Web Services
(AWS) continues growing its sales team in an effort to outcompete IaaS and
PaaS rivals such as Microsoft and as coopetitive partners such as SAP take AWS head-on. The recent general availability of AWS Outposts
increases AWS’ hybrid value proposition and will help the vendor maintain its
leadership in the consolidating IaaS market.” — Analyst Jack
McElwee