While Leidos Holdings Inc (NYSE:LDOS) has been executing "exceptionally well" on bookings, organic growth and margins, the engineering company's growth is likely to moderate in 2026, according to Stifel.

The Leidos Holdings Analyst: Analyst Jonathan Siegmann downgraded the rating from Buy to Hold, while keeping the price target at $220.

The Leidos Holdings Thesis: Moderation in growth in 2026 from the company's high-margin Department of Veterans Affairs (VA) Compensation and Pension (C&P) medical exams could exert pressure on the stock, Siegmann said in the downgrade note.

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The medical exam is used to determine whether a veteran's disability is "service-connected" and to identify the disability rating for benefits, he added.

The C&P exams, which generates over $5 billion annually and handles 93% of all VA evaluations, contribute more than 30% of Leidos Holdings' consolidated earnings, the analyst stated.

"While earnings from this key contract might not deteriorate as much as some may worry, it will likely take time for LDOS to prove this sustainability," he further wrote.

LDOS Price Action: Shares of Leidos Holdings closed lower by 0.71% at $195.22 on Thursday.

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