Science Applications International Corporation (SAIC Quick QuoteSAIC - Free Report) stock rallied 3.2% on Thursday after the company delivered better-than-expected second-quarter results and raised the revenue and earnings guidance for fiscal 2023.

Science Applications reported adjusted earnings of $1.75 per share, surpassing the Zacks Consensus Estimate of $1.68. However, the bottom line decreased 11% from the year-ago quarter’s earnings of $1.97 per share.

Revenues of $1.83 billion outpaced the consensus mark of $1.82 billion but declined $5 million from the year-ago quarter. The decline was primarily due to one less working day compared to the prior-year period, contract completions, lower net favorable changes in contract estimates and higher accelerated amortization on certain off-market liability contracts during the prior-year period.

The aforementioned negative factors, however, were partially offset 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 down 1.8%. The Halfaker & Associates business contributed approximately $30 million to total revenues.

Quarter in Detail

Net bookings for the fiscal second quarter were $2.1 billion, reflecting a book-to-bill ratio of 1.1. SAIC’s estimated backlog of signed business deals was $24.3 billion, of which $3.6 billion was funded.

The non-GAAP operating income declined 15% year over year to $125 million. The non-GAAP operating margin contracted 120 basis points to 6.8%.

Adjusted EBITDA decreased 10% year over year to $166 million. The adjusted EBITDA margin decreased to 9.1% from 10.1% in the year-ago quarter.

Balance Sheet & Cash Flow Details

Science Applications ended the fiscal second quarter with cash and cash equivalents of $99 million, up from the prior quarter’s $56 million. As of Jul 29, 2022, its long-term debt (net of the current portion) was $2.46 billion.

The company generated operating and free cash flows of $141 million and $74 million, respectively, in the second quarter.

In the fiscal second quarter, Science Applications paid out $20 million in dividends and repurchased shares worth $62 million.

Science Applications announced that its board of directors authorized a quarterly cash dividend of 37 cents per share, payable on Oct 28, 2022, to shareholders of record as of Oct 14, 2022.

Raised Fiscal 2023 Guidance

Buoyed by the stronger-than-expected second-quarter performance, Science Applications raised its revenue and earnings guidance range for fiscal 2023. The company now anticipates revenues between $7.50 billion and $7.55 billion for fiscal 2023, up from the previously forecast range of $7.43-$7.55 billion. The company now expects adjusted earnings in the band of $7.00-$7.20 per share instead of the earlier projection in the range of $6.90-$7.20.

Management still expects free cash flow to come between $500 million and $530 million for fiscal 2023.

Zacks Rank & Stocks to Consider

Currently, Science Applications carries a Zacks Rank #3 (Hold). Shares of SAIC have increased 12.5% year to date (YTD).

Some better-ranked stocks from the broader Computer and Technology sector are Clearfield (CLFD Quick QuoteCLFD - Free Report) , Silicon Laboratories (SLAB Quick QuoteSLAB - Free Report) and Taiwan Semiconductor (TSM Quick QuoteTSM - Free Report) . While Clearfield and Silicon Laboratories each sport a Zacks Rank #1 (Strong Buy), Taiwan Semiconductor carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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The Zacks Consensus Estimate for Silicon Laboratories’ third-quarter 2022 earnings has increased 36.1% to $1.13 per share over the past 60 days. For 2022, earnings estimates have moved 20.5% up to $4.41 per share in the past 60 days.

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The Zacks Consensus Estimate for Taiwan Semiconductor's third-quarter 2022 earnings has been revised a penny southward to $1.69 per share over the past 30 days. For 2022, earnings estimates have moved 37 cents north to $6.30 per share in the past 60 days.

TSM's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.9%. Shares of the company have decreased 32.1% YTD.