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CACI International (CACI) Up 5.6% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for CACI International (CACI). Shares have added about 5.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CACI International due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

CACI Q2 Earnings Surpass Estimates, Revenues Improve Y/Y

CACI International reported second-quarter fiscal 2022 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.

The company reported non-GAAP earnings of $4.39 per share surpassing the Zacks Consensus Estimate of $3.99 per share. The bottom line declined 6.4% from the year-ago quarter’s figure of $4.69 per share.

This decline in earnings was primarily due to lower operational income, high interest expenses and tax rates partially offset by a reduced number of shares outstanding. Reduction in shares outstanding can be attributed to the stock buyback worth $500 million under the accelerated share repurchase program announced in March 2021.

In the second quarter fiscal 2022, CACI reported revenues of $1.49 billion, missing the Zacks Consensus Estimate of $1.53 billion. However, the top line increased 1.2% from the prior-year quarter. Organic revenues improved 1% on a year-over-year basis.

Quarterly Details

Contract awards during the second quarter totaled $1.95 billion. The figure decreased 8.3% on a year-over-year basis. Revenues from contract awards exclude ceiling values of multi-award, indefinite-delivery, indefinite-quantity contracts.

CACI ended the quarter with a backlog of $24.1 billion, up 8% on a year-over-year basis. As of Dec 31, 2021, the funded backlog increased 7% to $3.1 billion.

In terms of customer mix, the Department of Defense contributed 69.8% to total revenues in the reported quarter. Federal Civilian Agencies made up 25%, while Commercial and other customers accounted for 5.2% of revenues.

Revenues generated as a prime contractor and a subcontractor accounted for 89.9% and 10.1% of total revenues, respectively.

In terms of contract type, cost-plus-fee type contracts, fixed-price contracts, and time and material type contracts contributed 59.9%, 28.3% and 11.8% to total revenues, respectively.

Revenues generated as ‘Expertise’ and ‘Technology’ accounted for 46.2% and 53.8% of total revenues, respectively.

Operating Details

Operating income for the quarter amounted to $124 million, down 12.3% year over year. Operating margin contracted 120 basis points (bps) to 8.4%. The company cited abnormally high profit margin in the prior-year quarter as the primary reason behind this decline. The downside was due to the pandemic-led lower travel & medical expenses and reduced delivery costs under the fixed price program last year.

Adjusted EBITDA slumped 9.5% year over year to $158 million. Adjusted EBITDA margin of 10.6% fell 130 bps.

Balance Sheet & Cash Flow

As of Dec 31 2021, CACI had cash and cash equivalents of $124.1 million compared with the previous quarter’s $104.4 million. Total long-term (net of current portion) debt was $2.08 billion, up from $1.65 billion as of Sep 30, 2021.

The company generated an operating cash flow (excluding MARPA) of $128.9 million during the second quarter, plunging 32.1% from the year-ago quarter. The decline was due to a $21 million gain from payroll tax deferral in the year-ago quarter under the CARES Act and a $47 million deferred payroll tax repayment in the current quarter.

During the first half of fiscal 2022, CACI generated $303.3 million of operating cash flow (excluding MARPA).

Free cash flow was $117.4 million during the quarter under review and $281.7 million in the first half of fiscal 2022.

Guidance Update

CACI updates its fiscal 2022 guidance. The company now projects revenues between $6.300 billion and $6.400 billion compared with the prior range of $6.200-$6.400 billion. Adjusted earnings are forecast between $18.14 and $18.57 per share compared with the earlier guidance of $18-$18.83 per share.

The company now expects a fiscal 2022 net income of $430-440 million compared with the prior range of $430-450 million. However, it still estimates free cash flow to be at least $720 million.

It continues to anticipate solid organic revenue growth and continued margin expansion throughout 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, CACI International has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CACI International has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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