Science Applications International Corporation ( SAIC Quick Quote SAIC - 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
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