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Why Is CACI International (CACI) Down 0.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for CACI International (CACI). Shares have lost about 0.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CACI International due for a breakout? 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 Q3 Earnings Top Estimates, Revenues Miss

CACI International reported better-than-anticipated bottom-line results for third-quarter fiscal 2021 (ended Mar 31, 2021). Quarterly earnings came in at $5.28 per share, beating the Zacks Consensus Estimate by 43%. The earnings figure also jumped 47.1% year over year.
 
Revenues came in at $1.55 billion in the fiscal third quarter, up 5.9% from the year-ago quarter’s reported figure. This upside can be primarily attributed to new business wins, acquired contracts and on-contract growth. The company registered organic revenue growth of 5.3% in the fiscal third quarter. However, the top-line figure missed the consensus mark of $1.58 billion.

Quarter Details

Contract awards in the reported quarter were worth $1.6 billion. Revenues from contract awards do not include ceiling values of multi-award, indefinite-delivery, indefinite-quantity contracts.
 
Total backlog, as of Mar 31, 2021, was $22.3 billion, 12.3% higher than the prior-year quarter’s level. Funded backlog at the end of March 2021 was $3 billion, up 1.3%.
 
In terms of customer mix, the Department of Defense contributed 69.2% to total revenues in the reported quarter. Federal Civilian Agencies contributed 26.2%, while Commercial and other customers accounted for 4.6% of revenues.
 
Revenues generated as a prime contractor and a subcontractor accounted for 90.3% and 9.7% of total revenues, respectively.
 
In terms of contract type, cost-plus-fee type contracts contributed 58.3%, fixed-price contracts contributed 29.5% and time and material type contracts contributed 12.2% to total revenues.

Margins

Operating income for the fiscal third quarter came in at $151.4 million, up 33.2% from the year-earlier quarter’s figure. This upswing resulted from higher revenues, favorable fixed-price contract performance, strong operating performance and lower indirect costs. Operating income margin expanded 200 basis points (bps) to 9.8%.
 
Adjusted EBITDA for the fiscal third quarter climbed 29.9% year over year to $183.7 million. Adjusted EBITDA margin of 11.8% advanced 210 bps.

Balance Sheet and Cash Flow

At the end of the fiscal third quarter, CACI International had cash and cash equivalents of $105.6 million compared with the previous quarter’s $102.1 million.
 
Total long-term (net of current portion) debt was $1.78 billion.
 
During the first nine months of fiscal 2021, the company generated a cash flow of $500.5 million from operational activities.

Guidance

Due to significant impacts of COVID-related disruptions, including travel restrictions, reduction in government processing of deployment orders and delays in task orders, CACI reduced its full-year fiscal 2021 revenue guidance. Revenues are now projected at $6 - $6.08 billion, down from the previous outlook of $6.05-$6.25 billion.
 
However, guidance for earnings per share was raised to reflect strong operating performance, lower program and indirect expenses, and certain tax benefits. Earnings per share are now estimated between $18 and $18.4, up from the previously guided range of $14.47-$15.25.
 
The company raised the net income guidance of $372-$392 million to $450-$460 million.
 
Notably, net cash provided by operating activities is still estimated to be at least $600 million.
 
The company continues to anticipate solid organic revenue growth and continued margin expansion throughout 2021.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 47.91% due to these changes.

VGM Scores

At this time, CACI International has an average Growth Score of C, a grade with the same score on the momentum front. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise CACI International has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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