What happened Shares of Leidos Holdings (NYSE: LDOS) traded down about 10% on Tuesday following the government IT specialist's earnings release. The quarter was mixed, but the company's outlook for 2021 failed to impress on a difficult day for stocks. So what Leidos said before markets opened that it earned $1.63 per share in the quarter on revenue of $3.25 billion. The earnings number beat estimates by two cents per share, but revenue came in shy of the $3.39 billion consensus. Revenue was up 10.1% year over year, but down slightly on an organic basis. The company ended the period with a record backlog of $31.9 billion in orders, and has a healthy 1.4 times book-to-bill ratio -- a measure of how much new business is coming in compared to how much is billed -- over the past 12 months. Leidos' autonomous Sea Hunter. Image source: U.S. Navy photo by John F. Williams. Leidos also said it intends to acquire privately held Gibbs & Cox for $380 million, adding engineering talent and greater exposure to the maritime market. Leidos was one of the driving forces behind the Sea Hunter, a U.S. Navy drone ship that in 2019 sailed from San Diego to Hawaii and back with little human intervention. The results come less than a week after short-seller Spruce Point Capital Management issued a report claiming mismanagement and potential fraud at Leidos. The short report did little to move the stock, but the earnings report a week later is causing a sell-off. LDOS data by YCharts Now what Leidos' initial 2021 guidance calls for $13.7 billion to $14.1 billion in sales, and earnings of $6.15 to $6.45 per share. The earnings range is below the Street's $6.47 per share forecast, and the midpoint of revenue guidance is below the $13.96 billion estimate, which is likely fueling a lot of the sell-off. I see nothing in the report to suggest the sky is falling, but following two large acquisitions in 2020, Leidos is clearly a company in transition during what is a challenging defense procurement climate. Leidos remains a company with great potential, but the quarterly report makes it clear it could take time for Leidos to reach that potential. 10 stocks we like better than Leidos HoldingsWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Leidos Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of November 20, 2020 Lou Whiteman owns shares of Leidos Holdings. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.Source