DRS Stock Forecast & Price Target

Leonardo DRS is well positioned because its embedded, sole-source franchises in advanced sensing, computing, force protection, and naval power create unusually durable revenue visibility, with funded backlog reaching a record $5.09B in 2Q26, up 17% and covering about 88% of expected 2H26 revenue. Its merchant-supplier model across land, air, sea, space, and cyber lets it win content on multiple long-lived platforms without carrying full platform risk, while newer wins in counter-UAS, space sensing, and software broaden growth beyond legacy defense programs. Fundamentals also look constructive as management raised 2026 guidance twice, and forecasts call for $3.96B revenue, $555.0M adjusted EBITDA at a 14.0% margin, and $1.46 adjusted EPS.

Leonardo DRS is burdened by heavy execution risk because about $3.2 billion of 2025 revenue was fixed-price, leaving the company exposed to overruns, while prior program slippage already cut IMS revenue and adjusted EBITDA by about $67 million and $65 million. Its outlook is also constrained by technical and supply-chain uncertainty, including germanium shortages, unproven space sensing and AI-enabled systems at production scale, and a capital-intensive ramp that is pressuring free cash flow despite management targeting roughly 75% FCF conversion. On top of that, roughly 80% of revenue comes from the U.S. government, the Navy supplies more than a third, and sole-source dependence plus the $450 million Raft deal and about 7% unionized workforce add concentration, integration, and labor risk.