Why Is CACI International (CACI) Down 8.5% Since Last Earnings Report?
A month has gone by since the last earnings report for CACI International (CACI). Shares have lost about 8.5% 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 drivers.
CACI International Q4 Earnings Top Estimates, Sales Miss
CACI International reported mixed fourth-quarter fiscal 2023 results, wherein earnings surpassed the Zacks Consensus Estimate, but revenues fell short of the same. However, the fourth-quarter top and bottom lines registered a year-over-year improvement.
The national security-related IT solutions and services provider reported non-GAAP earnings of $5.30 per share, beating the Zacks Consensus Estimate of $4.85. Moreover, the bottom line increased 16.7% from the year-ago quarter’s figure of $4.54 per share. This rise in earnings was primarily driven by higher revenues, increased operating income and a lower share count, partially offset by increased interest expenses.
In the fourth quarter of fiscal 2023, CACI reported revenues of $1.70 billion, marginally falling short of the Zacks Consensus Estimate of $1.72 billion. However, the top line increased 3.7% from the prior-year quarter, primarily driven by the successful execution of its strategy. The company also noted that the increase in revenues was entirely driven by organic growth.
Quarterly Details
In the fourth quarter, contract awards totaled $2.3 billion, with approximately 70% for the new business. Revenues from contract awards excluded the ceiling value of multi-award, indefinite-delivery indefinite-quantity contracts.
CACI ended the quarter with a backlog of $25.8 billion, up 11% on a year-over-year basis. As of Jun 30, 2023, the funded backlog increased by 16% to $3.7 billion. Our estimates for the total backlog and the funded backlog were pegged at $24.4 billion and $3.4 billion, respectively.
In terms of the customer mix, the Department of Defense contributed 74.2% to total revenues in the reported quarter. Federal Civilian Agencies made up 20.8%, while Commercial and other customers accounted for 5% of revenues. Our estimates for the Department of Defense, Federal Civilian Agencies, and Commercial and Other customers’ contributions toward total revenues were pegged at 71.1%, 23.6% and 5.3%, respectively.
Revenues generated as a Prime Contractor and a Subcontractor accounted for 88.4% and 11.6% of the total revenues, respectively. Our model estimates suggested contributions from the Prime Contractor and the Subcontractor of 89.4% and 10.6%, respectively.
In terms of contract type, cost-plus-fee-type contracts, fixed-price contracts, and time and material-type contracts contributed 58.8%, 29.5% and 11.7%, respectively, to total revenues. Our model estimates suggested contributions from cost-plus-fee-type contracts, fixed-price contracts, and time and material-type contracts of 58.4%, 29% and 12.5%, respectively.
Revenues generated as ‘Expertise’ and ‘Technology’ accounted for 47.2% and 52.8% of the total revenues, respectively. Our estimates for Expertise and Technology contributions toward total revenues were pegged at 45.9% and 54.1%, respectively.
The operating income for the quarter amounted to $148.8 million, up 24.2% year over year. The operating margin expanded by 140 basis points (bps) to 8.7%.
Adjusted EBITDA increased 18.2% year over year to $185.7 million. The adjusted EBITDA margin expanded by 130 bps to 10.9%.
Balance Sheet & Cash Flow
As of Jun 30, 2023, CACI had cash and cash equivalents of $115.8 million compared with the previous quarter’s $106.8 million. The total long-term (net of the current portion) debt was $1.65 billion, down from $1.77 billion as of Mar 31, 2023.
The company generated operating cash flow (excluding mini-automatic radar plotting aid or MARPA) of $124.8 million in the fourth quarter, declining by 18.1% from the year-ago quarter. Free cash flow was $101.9 million during the quarter under review. In fiscal 2023, CACI generated operating cash flow (excluding MARPA) and free cash flow of $345.8 million and $282.1 million, respectively.
Fiscal 2024 Guidance
For fiscal 2024, CACI now projects revenues between $7 billion and $7.2 billion. Adjusted earnings are projected in the range of $19.13-$20.22 per share.
CACI expects the fiscal 2024 adjusted net income in the range of $440-$465 million. It forecast to generate free cash flow of at least $400 million during the fiscal.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, CACI International has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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, 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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