It has been about a month since the last earnings report for SAIC (SAIC). Shares have lost about 2.6% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is SAIC due for a breakout? 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 Soars as Q1 Earnings Beat Estimates
Science Applications International Corporation stock gained 6.9% just after the company delivered better-than-expected first-quarter results and raised the revenue and earnings guidance for fiscal 2023.
Science Applications reported adjusted earnings of $1.88 per share, surpassing the Zacks Consensus Estimate of $1.78. However, the bottom line decreased 3% from the year-ago quarter’s earnings of $1.94 per share.
Revenues increased 6% from the year-ago quarter’s level to $2 billion, outpacing the consensus mark of $1.93 billion. The top line was primarily driven by contributions from the newly acquired Halfaker & Associates business and the ramp-up of new and existing contracts. Adjusting for the impact of acquired revenues, the metric moved up 3.9%.
Quarter in Detail
Net bookings for the fiscal first quarter were $2 billion, reflecting a book-to-bill ratio of 1. SAIC’s estimated backlog of signed business deals was $24.1 billion, of which $3.2 billion was funded.
The non-GAAP operating income declined 4% year over year to $134 million. The non-GAAP operating margin contracted 80 basis points to 6.7%.
Adjusted EBITDA decreased 6% year over year to $173 million. The adjusted EBITDA margin decreased to 8.7% from 9.8% in the year-ago quarter.
Balance Sheet & Cash Flow Details
Science Applications ended the fiscal first quarter with cash and cash equivalents of $56 million, down from the prior quarter’s $106 million. As of Apr 29, 2022, its long-term debt (net of current portion) was $2.34 billion.
The company generated operating and free cash flows of $118 million and $113 million, respectively, in the first quarter.
In the fiscal first quarter, Science Applications paid $22 million in dividends and repurchased shares worth $84 million. SAIC made $59 million of principal payments on borrowings during the quarter.
Science Applications announced that its board of directors authorized a quarterly cash dividend of 37 cents per share, payable on Jul 29, 2022 to shareholders of record as of Jul 15, 2022. Additionally, management increased the company’s share repurchase authorization limit by 8 million shares to 8.8 million shares.
Raised Fiscal 2023 Guidance
Buoyed by the stronger-than-expected first-quarter performance, Science Applications raised its revenue and earnings guidance range for fiscal 2023. The company now anticipates revenues between $7.43 billion and $7.55 billion for fiscal 2023, up from the previously forecasted range of $7.35-$7.55 billion. The company now expects adjusted earnings in the band of $6.90-$7.20 per share instead of the earlier projection in the range of $6.80-$7.10.
Management still feels free cash flow to be between $500 million and $530 million for fiscal 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
At this time, SAIC has a great Growth Score of A, though it is lagging a lot 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.
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 is part of the Zacks Computers - IT Services industry. Over the past month, SentinelOne (S), a stock from the same industry, has gained 3.9%. The company reported its results for the quarter ended April 2022 more than a month ago.
SentinelOne reported revenues of $78.26 million in the last reported quarter, representing a year-over-year change of
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