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CACI International (CACI) Down 0.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for CACI International (CACI - Free Report) . Shares have lost about 0.7% in that time frame, outperforming 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 International reported better-than-expected fourth-quarter fiscal 2020 (ended Jun 30, 2020) results.

Quarterly earnings were $3.68 per share, up 87.2% year over year and beating the Zacks Consensus Estimate by 9.2%.

Revenues were approximately $1.5 billion, up 8.9% from the year-ago quarter’s figure. The upside can be primarily attributed to new business wins, acquired contracts and on-contract growth. Organic revenue growth in the fiscal fourth quarter stood at 8%. The top line also outpaced the consensus mark of $1.48 billion.

Quarter Details

Contract awards in the reported quarter were worth $3.4 billion, a 9.5% year-over-year decline, of which approximately 55% came from new businesses. Revenues from contract awards do not include ceiling values of multi-award, indefinite-delivery, indefinite-quantity contracts.
Total backlog, as of Jun 30, 2020, was $21.6 billion, up 28% higher than the prior-year quarter’s level. Funded backlog at the end of June was $2.8 billion, down 3.4%.

In terms of customer mix, the Department of Defense contributed 69.1% to total revenues in the quarter. Federal Civilian Agencies contributed about 26.8%, while Commercial and other customers accounted for 4.1% of revenues.

Revenues generated as a prime contractor and a subcontractor accounted for 91.7% and 8.3% of total revenues, respectively.

In terms of contract type, cost reimbursable type contracts contributed 57.2%, fixed-price contracts contributed 27.9%, and time and material type contracts contributed 14.9% to total revenues.

Margins

Operating income for the quarter came in at $133.7 million, up 64.8% from the year-ago quarter’s level. The upside came on the back of higher revenues as well as lower indirect costs and selling expenses. Operating income margin expanded 300 basis points (bps) to 8.9%.

Adjusted EBITDA for the fiscal fourth quarter increased 48.8% year over year to $162.9 million. Adjusted EBITDA margin of 10.9% expanded 290 bps.

Balance Sheet and Cash Flow

At the quarter end, CACI International had cash and cash equivalents of $107.2 million compared with $77.2 million in the previous quarter.

Total long-term (net of current portion) debt was $1.36 billion.

Cash flow from operations, as of Jun 30, was $518.7 million, driven by growth in net income combined with lower DSO.

Guidance

CACI International initiated its guidance for fiscal 2021. Revenues are expected in the range of $6-$6.2 billion. Earnings per share are expected between $13.50 and $14.28.

Net income is expected in the range of $347-$367 million. Moreover, net cash provided by operating activities is expected to be at least $580 million.

The company expects to accelerate organic revenue growth and continued margin expansion throughout 2021.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, CACI International has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second 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 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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