Science Applications (SAIC) Q4 Earnings Top Estimates, Up Y/Y

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Science Applications SAIC reported mixed results for fourth-quarter fiscal 2021, wherein earnings topped the Zacks Consensus Estimate but revenues missed the same. Nonetheless, the company recorded year-over-year growth in both metrics, mainly benefiting from higher demand for its technology solutions owing to the ongoing digital transformation wave across the defense, space, intelligence and civilian markets.

The company’s fiscal fourth-quarter adjusted earnings increased 6% year over year to $1.67 per share and surpassed the Zacks Consensus Estimate by 16.8%.

Quarterly revenues grew 11% from the year-ago period to $1.72 billion. Revenues realized from the acquisition of Unisys Federal mainly drove the top line. Solid performance of the company’s contract portfolio, including new U.S. Air Force contract wins, was a tailwind. Adjusting for the impact of acquired revenues, the metric inched up 0.8%.

However, quarterly revenues fell short of the consensus mark of $1.78 billion. An $80 million impact on revenues due to lower volumes in the supply chain business, reduced FAA training service revenues and profit recovery on ready-state labor hurt the top line.

The pandemic also resulted in an impact of $4 million on adjusted EBITDA during the quarter.

Science Applications International Corporation Price, Consensus and EPS Surprise

Science Applications International Corporation Price, Consensus and EPS Surprise
Science Applications International Corporation Price, Consensus and EPS Surprise

Science Applications International Corporation price-consensus-eps-surprise-chart | Science Applications International Corporation Quote

Quarter in Detail

Net bookings for the fiscal fourth quarter were $0.7 billion, reflecting a book-to-bill ratio of 0.4. Science Applications’ estimated backlog of signed business deals was $21.5 billion, of which $3 billion was funded.

Non-GAAP operating income grew 5% year over year to $109 million, primarily driven by Unisys Federals’ acquisition along with lower integration and indirect costs. However, non-GAAP operating margin contracted 50 basis points to 6.3% mainly due to the COVID-19 impact.

Adjusted EBITDA increased 19% year over year to $159 million. Moreover, adjusted EBITDA margin expanded 60 basis points to 9.3%.

Balance Sheet & Cash Flow

Science Applications ended the fiscal fourth quarter with cash and cash equivalents of $171 million, down from the prior quarter’s $182 million.

The company generated operating cash flow of $53 million during the quarter and $755 million in 2021. The quarterly cash flow from operating activities was $16 million lower year over year due to higher income tax payments and a net increase in working capital.

However, the cash flow from operating activities for the fiscal year was higher year over year, driven by cash provided from operating activities of Unisys Federal and deferred payroll tax payments.

Excluding the MARPA facility, free cash flow was $54 million in the fourth quarter and $524 million in the full fiscal year.

During the reported quarter, Science Applications deployed $239 million of capital, which includes $21 million for dividend payments, $18 million for mandatory debt repayment and $200 million for voluntary debt repayment.

Guidance

Science Applications provided its fiscal 2022 guidance. The company anticipates revenues between $7.1 billion and $7.3 billion. The top-line guidance indicates a negative impact of $150 million to $200 million on the supply chain portfolio, stemming from the coronavirus pandemic.

It reaffirmed adjusted earnings in the $6-$6.25 per share range.

Free cash flow is expected between $430 million and $470 million in fiscal 2022.

Zacks Rank & Stocks to Consider

Science Applications currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader technology sector are Skyworks Solutions SWKS, Vishay Intertechnology, Inc. VSH and Etsy, Inc. ETSY, each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Skyworks Solutions, Vishay Intertechnology and Etsy is currently pegged at 18.98%, 20.26% and 25.25%, respectively.

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The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

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