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Science Applications (SAIC) Soars as Q1 Earnings Beat Estimates

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Science Applications International Corporation (SAIC - Free Report) stock gained 6.9% on Monday 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.

Zacks Rank & Stocks to Consider

Currently, Science Applications carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader technology sector are ON Semiconductor (ON - Free Report) , Analog Devices (ADI - Free Report) and MaxLinear (MXL - 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.

The Zacks Consensus Estimate for ON's second-quarter 2022 earnings has been revised to $1.26 per share from $1.04 over the past 60 days. For 2022, earnings estimates have moved north by 18% to $4.91 per share in the past 60 days.

ON's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 2.8%. Shares of ON have rallied 73.9% in the past year.

The Zacks Consensus Estimate for Analog Devices' third-quarter fiscal 2022 earnings has been revised upward by 24 cents to $2.42 per share over the past 30 days. For fiscal 2022, earnings estimates have moved north by 9.6% to $9.24 per share in the past 30 days.

Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 7.7%. Shares of ADI have increased 0.5% in the past year.

The Zacks Consensus Estimate for MaxLinear's second-quarter 2022 earnings has been revised upward by 10 cents to $1.02 per share over the past 60 days. For 2022, the Zacks Consensus Estimate for MaxLinear's earnings has moved north by 36 cents to $4.07 per share in the past 60 days.

MaxLinear's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 9.6%. Shares of MXL have increased 6% in the past year.