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CACI International Inc. (CACI - Analyst Report) reported second-quarter fiscal 2014 earnings of $35.0 million or $1.38 per share, down from $39.7 million or $1.69 a share in the year-earlier quarter. The year-over-year drop in earnings was primarily attributable to a decline in revenues.

On a non-GAAP basis, adjusted earnings in the reported quarter stood at $2.05 per share versus $2.22 in the year-ago quarter. Although the adjusted earnings for second-quarter fiscal 2014 decreased year over year, it comfortably beat the Zacks Consensus Estimate of $1.39.

Quarter Details

Continued uncertainty related to budgetary constraints and 16-day government shutdown in October dragged the quarterly revenues down by 4.0% year over year to $894.2 million. The quarterly revenues missed the Zacks Consensus Estimate of $901 million.  

Contract funding orders aggregated $599 million in the quarter, bringing the tally for total backlog to $7.6 billion in Dec 31, 2013 with a funded backlog of $1.8 billion.

In terms of customer mix, the Department of Defense accounted for about 72.7% of total revenue in the reported quarter. Federal Civilian Agencies contributed about 20.9%, while Commercial and other customers accounted for 6.4% of total revenue.

Operating income stood at $66.5 million in the reported quarter versus $69.6 million in the year-ago quarter. The decrease in operating income was primarily due to a $9.7 million one-time acquisition-related expense for Six3 Systems (Six3). Earnings before interest, taxes, depreciation and amortization (EBITDA) stood at $83.2 million versus $83.5 million in the year-ago quarter.

CACI International received contracts worth $717 million in the quarter. During the reported quarter, CACI International procured awards in all 10 markets with approximately 25% of awards in new business and over 60% were recompete wins.
    
During the quarter, CACI International completed the $820 million acquisition of Six3 Systems, Inc., which positions it as a leader in advanced intelligence and cyber security offerings for national security customers.

Balance Sheet and Cash Flows

The company ended the quarter with cash and cash equivalents of $98.2 million. Long-term debt (net of current portion) totaled $1,409 million.

Net cash provided by operations for the first six months of fiscal 2014 was $44.6 million compared with $96.0 million in the year-ago period, owing to cash utilized for Six3 acquisition.

Outlook

For fiscal 2014, CACI International updated its previous revenue guidance from $3500 million -$3,700 million to $3,650 million-$3,800 million.   Net income is expected to be $142 million to $152 million, which remains unchanged from previous guidance. Earnings per share was updated from the previous range of $5.70 -$6.10 to $5.59 to $5.98. The company expects the acquisition of Six3 to generate $275 million to $325 million of revenues in FY14.

Moving ahead, CACI International expects to diligently focus on its operating plans to reward its shareholders with attractive risk-adjusted returns.

CACI International intends to drive operational excellence by intensively focusing on its organic and inorganic growth strategy and strengthening its existing customer relationships while building newer ones. CACI International also remains focused on its strategy to grow in larger markets, drive operational excellence, and leverage mergers and acquisitions to further increase its market share and create long-term value for its shareholders.

CACI International currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth considering in the industry include The KEYW Holding Corporation (KEYW - Snapshot Report), carrying a Zacks Rank #1 (Strong Buy), and Lionbridge Technologies Inc. (LIOX - Snapshot Report) and Virtusa Corp. (VRTU - Snapshot Report), both carrying a Zacks Rank #2 (Buy).

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