Overview
Leonardo DRS has secured a subcontract to provide infrared mission payloads for the Space Development Agency's Proliferated Warfighter Space Architecture Tracking Layer Tranche 3 program. The work will involve designing, building, integrating, and testing advanced infrared mission payloads intended to improve global detection and tracking capabilities for ballistic missiles and hypersonic weapons.
Analyst view and market data
Following the announcement, BTIG analyst Andre Madrid reiterated a Buy rating on Leonardo DRS and maintained a $50.00 price target. The stock is trading at $42.16 and carries a price-to-earnings ratio of 42.65. Market capitalization stands at $11.22 billion. Separate market data flagged the equity as currently in overbought territory.
Program context and potential scale
The Space Development Agency previously awarded approximately $3.5 billion in contracts to four prime contractors to build 72 satellites planned for launch in fiscal year 2029. The listed prime contractors on that award are Rocket Lab, Northrop Grumman, Lockheed Martin, and L3Harris. BTIG notes that payloads in comparable programs typically account for more than one-quarter of the total program value.
With Leonardo DRS reporting annual revenue of $3.57 billion, BTIG's analysis of the Tranche 3 program suggests the subcontract could translate into a multi-year stream of work worth several hundred million dollars. The exact value and duration will depend on contract scope and integration arrangements with the unnamed prime contractor.
Recent performance and outlook
Leonardo DRS reported strong third-quarter results that exceeded analyst expectations for both revenue and earnings, a performance attributed in the report to robust defense demand across the company's business segments. Management has also raised its revenue outlook for 2025, signaling confidence in future growth prospects.
Market health indicators for the company show a 'GOOD' overall financial health score. Still, the company-level valuation metrics and the market's overbought signal present considerations for investors weighing entry timing against longer-term contract potential.
What remains uncertain
The company did not disclose which prime contractor it will support under the Tranche 3 program. BTIG's estimate that the subcontract could be worth several hundred million dollars is based on analyzing the program's overall scope and typical payload value ratios, not on a disclosed contract price. As such, exact revenue timing and contract milestones remain unspecified.