SAIC (SAIC) Up 8.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for SAIC (SAIC). Shares have added about 8.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is SAIC due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Science Applications Q1 Earnings & Sales Beat Estimates
Science Applications delivered better-than-expected first-quarter fiscal 2024 results. The company reported adjusted earnings of $2.14 per share, surpassing the Zacks Consensus Estimate of $1.79. The bottom line increased 14% from the year-ago quarter’s earnings of $1.88 per share, mainly driven by higher revenues, the benefits of ongoing margin improvement initiatives and a lower tax rate.
Revenues increased 2% year over year to $2.03 billion and outpaced the consensus mark of $1.92 billion. The top line benefited from the timing of certain material sales previously planned for later in the fiscal year, along with improved performance.
Quarter in Detail
Net bookings for the fiscal first quarter were $2.1 billion, reflecting a book-to-bill ratio of 1.1. SAIC’s estimated backlog of signed business deals was $23.8 billion at the end of the first quarter, of which $3.9 billion was funded.
The non-GAAP operating income increased 13% year over year to $152 million. The non-GAAP operating margin expanded 80 basis points to 7.5%.
Adjusted EBITDA increased to $189 million from $173 million in the year-ago quarter. The adjusted EBITDA margin expanded to 9.3% from 8.7% in the year-ago quarter.
Balance Sheet & Cash Flow Details
Science Applications ended the fiscal first quarter with cash and cash equivalents of $422 million, up from the prior quarter’s $109 million. As of May 5, 2023, its long-term debt (net of the current portion) was $2.33 billion.
The company generated operating and free cash flows of $82 million and $76 million, respectively, in the first quarter. In the fiscal first quarter, Science Applications paid out $21 million in dividends and repurchased shares worth $70 million.
Science Applications announced that its board of directors authorized a quarterly cash dividend of 37 cents per share, payable on Jul 28 to shareholders of record as of Jul 14.
Raised Fiscal 2024 Guidance
Buoyed by the strong first-quarter performance, SAIC raised its guidance for the full-fiscal 2024. The company now anticipates revenues in the band of $7.125-$7.225 billion in fiscal 2024 instead of the earlier projected range of $7.05-$7.20 billion. Science Applications now expects adjusted earnings in the band of $7.00-$7.20 per share, up from the previous range of $6.80-$7.00.
However, management still expects to generate free cash flow between $460 million and $480 million in fiscal 2024. It continues to project the adjusted EBITDA margin between 9.2% and 9.4% in fiscal 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, SAIC has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, SAIC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
SAIC belongs to the Zacks Computers - IT Services industry. Another stock from the same industry, SentinelOne (S), has gained 10.5% over the past month. More than a month has passed since the company reported results for the quarter ended April 2023.
SentinelOne reported revenues of $133.39 million in the last reported quarter, representing a year-over-year change of +70.4%. EPS of -$0.15 for the same period compares with -$0.21 a year ago.
SentinelOne is expected to post a loss of $0.15 per share for the current quarter, representing a year-over-year change of +25%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.4%.
SentinelOne has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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