11:28 AM EDT, 09/04/2025 (MT Newswires) -- Leidos' ( LDOS ) strength lies in its Health Services and Civil segment, which has been the main source of upside for shares over the past year, RBC Capital Markets said in a note Thursday.

Leidos ( LDOS ) has consistently reported results above expectations, with the company beating revenue by 3%, and adjusted EPS topping expectations by 22% on average since Q3 2023, the investment firm said.

The Health and Civil segment remains a key strength, driven by high volumes of veterans' exams, while near-term volumes are expected to support "sustained margin strength," RBC said, adding it expects margins to decline slightly in fiscal 2026 and 2027.

RBC analysts also said they view Leidos' ( LDOS ) defense portfolio as "underappreciated," as the company is seen primarily as a government services firm. The analysts said they believe the defense segment's "strong outlook" could be positive for the stock.

Free cash flow is forecast at $1.45 billion in fiscal 2025, $1.55 billion in fiscal 2026, and $1.7 billion in fiscal 2027, with an investor day expected in 2026 to outline updated mid-term goals, according to the note.

RBC upgraded Leidos ( LDOS ) to outperform from sector perform and raised its price target to $210 from $180.

Price: 177.95, Change: +0.24, Percent Change: +0.14