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CACI International (CACI) Beats on Q3 Earnings, Raises View

Zacks Equity Research

CACI International CACI reported third-quarter fiscal 2019 results, wherein both earnings and revenues beat the Zacks Consensus Estimate.

The company benefited from strong program performance, acquisitions, and record awards and contract funding.

Earnings for the quarter were $2.69 per share compared with $2.33 in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of $2.30. Lower 2019 tax rates due to a  tax reform in fiscal 2018, and $4 million worth of tax benefits realized in the fiscal third quarter contributed to the bottom-line performance.

Quarterly revenues were $1.26 billion, up 12.5% from the year-ago quarter. The rise was primarily attributable to new business wins, acquired contracts and on-contract growth, which aided organic expansion. The top line also surpassed the consensus estimate of $1.24 billion.

CACI International, Inc. Price, Consensus and EPS Surprise

CACI International, Inc. Price, Consensus and EPS Surprise | CACI International, Inc. Quote

Quarter Details

Contract awards in the reported quarter were worth $2.7 billion, up a whopping 93.5% year over year, of which approximately 85% came from new businesses. Revenues from contract awards excluded ceiling values of multi-award, indefinite delivery, indefinite quantity (IDIQ) contracts.

Contract funding orders were $1.7 billion, up 50.8%.

Total backlog as of Mar 31, 2019 was $14.9 billion, 35.3% higher than prior-year quarter. Funded backlog at the end of March was $2.9 billion, up 51.6%.

In terms of customer mix, the Department of Defense accounted for about 70.1% of total revenues in the reported quarter. Federal Civilian Agencies contributed about 25.2% while Commercial and other customers accounted for 4.7% of revenues.

During the quarter, CACI secured several notable contracts. These included a five-year, $415 million contract to design and deploy new technologies for signals intelligence, electronic warfare and cyber security; and a five-year, $71 million task order to assist the U.S. Army with next generation of soldier sensor and laser products and systems. It also won a five-year, $61 million prime contract with the Defense Health Agency’s Theater Enterprise-Wide Logistics System; a prime position on a 10-year, multiple-award IDIQ contract, with a ceiling value of $982 million, to provide electronic warfare and cyber capability research and development.

Another notable one was the seven-year, multiple-award Cyber Mission Engineering IDIQ contract, with a shared ceiling value of $898 million to provide cyber engineering and electronic warfare solutions to the U.S. Navy.

During the quarter, the integration of LGS Innovations (acquired in March) and Mastodon Design (acquired in January) was largely completed.

These buyouts, when combined with CACI’s capabilities, are expected to enable the company to provide products and solutions that address robust requirements in the areas of signals intelligence and spectrum management, electronic warfare, communications, C4ISR and cyber defense.

Margins

Operating income for the quarter came in at $94.9 million, down 9.4% from the year-ago quarter. The tough year-over-year comparison was a result of transaction-related expenses of about $14 million in the third quarter of fiscal 2019 as opposed to $22 million worth of non-recurring benefits in the prior-year quarter. The impact of a tax reform in fiscal 2018 was an overhang.

Operating income margin contracted 180 basis points (bps) year over year to 7.5%.

Adjusted EBITDA for the fiscal third quarter decreased 4.7% year over year to $117.2 million.  Adjusted EBITDA margin of 9.3% contracted 160 bps.

Balance Sheet and Cash Flow

At the quarter end, CACI had cash and cash equivalents of $93.8 million compared with $70.7 million in the previous quarter.

Total long-term debt was $1.07 billion.

Cash flow from operations as of Mar 31, 2019, was $452.8 million compared with $139.5 million in the previous quarter.

Guidance

Encouraged by improved core business and tax benefits to be realized throughout the fiscal year, CACI raised guidance for fiscal 2019.

Revenues are now expected in the range of $4.9 billion to $5.03 billion, up from the previous guidance of $4.88-$5.03 billion.

The company also raised its net income and earnings guidance for fiscal 2019.

Net income is now expected in the range of $262-$270 million, up from $255-$265 million guided earlier.

Earnings per share are now expected to be between $10.31 and $10.63, up from the previously projected range of $9.96-$10.35.

Zacks Rank and Other Key Picks

CACI currently has a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader Computer and Technology sector are ACI Worldwide, Inc. ACIW, Cadence Design Systems, Inc. CDNS and Verint Systems Inc. VRNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for ACI, Cadence and Verint is projected to be 12%, 12% and 11%, respectively.

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