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CACI Remains Focused on Organic Growth Despite Headwinds

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On Jan 9, we updated the research report on information technology services provider, CACI International Inc. (CACI - Free Report) .

CACI International intends to drive operational excellence by intensively focusing on a holistic growth model and strengthening its existing customer relationships while building newer ones. The company anticipates to significantly benefit from its cost-reduction program. It is also focused on its strategy to grow in larger markets, drive operational excellence, and leverage mergers and acquisitions to increase its market share and create long-term value for its shareholders.

In addition, CACI International has a large pipeline of new projects and continues to win more deals at regular intervals. These back-to-back contract wins are the key catalysts to the company’s success. Furthermore, having the government as a big client lends stability to the business and moderates fluctuations in revenues. Although the government’s approval process is usually lengthy, the project continues to earn money even years after it has been approved.

Moreover, government contracts improve the visibility of future revenue streams. We believe the company is comfortably positioned, given its favored relationship with the Department of Defense. Cyber attacks are also creating increased awareness, leading to a heightened demand for cyber solutions. From 2009 to 2016, the company’s revenues witnessed a compounded annual growth rate of 4.03%.

However, CACI International has underperformed the industry in the last three months with an average decline of 3% against 5.4% gain for the latter. Evolving rules and regulations remain a significant impediment to margin growth.



Moreover, CACI International derives a significant portion of its revenues from the U.S. federal government as either a prime contractor or a subcontractor. These contracts are subject to extensive legal and regulatory hurdles, which are stringent and subject to change. The government also investigates operations periodically to ensure that the terms and conditions have been properly adhered to. Deviations from the terms laid out by the government often result in huge penalties or termination, leading to revenue shortfalls.

Nevertheless, we remain encouraged by this Zacks Rank #3 (Hold) stock’s relatively healthy growth dynamics. Better-ranked stocks in the industry include Ebix, Inc. , OBIC CO LTD (OBIIF - Free Report) and TransUnion (TRU - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ebix has a long-term earnings growth expectation of 10%. It has beaten earnings estimates in each of the trailing four quarters with an average positive earnings surprise of 9%.

OBIC CO has healthy long-term earnings growth expectation of 10%.

TransUnion has a long-term earnings growth expectation of 10%. It has beaten earnings estimates in each of the trailing four quarters with an average positive earnings surprise of 10.3%.

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