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Analyst Blog

The steady revenue stream, driven by a large pipeline of new projects and multi-million deals at regular intervals has enabled CACI International Inc. (CACI - Free Report) to successfully outperform the industry this year. This Zacks Rank #3 (Hold) stock boasts an average year-to-date return of 40.8% compared with 26.3% for the Zacks categorized Computer-Services industry.

A leader in IT outsourcing for the U.S. federal government, CACI earns its revenues through four customer groups – the Department of Defense, Federal Civilian Agencies, Commercial and Other, and State and Local Governments. The Department of Defense’s customers include the U.S. Army (CACI’s largest customer) and the U.S. Navy. Federal civilian agencies provide litigation support services to the Department of Justice.

Having the government as one of the biggest clients lends stability to the business and moderates fluctuations in revenues. Although, the government generally has a lengthy approval process, the project continues earning money years after it has been approved. Moreover, government contracts improve the visibility of future revenue streams.

CACI’s system integration skills and intelligence expertise consume a significant portion of the funds earmarked for the Department of Homeland Security, while creating systems that foster the sharing of critical information among all intelligence agencies. We believe the company is comfortably positioned, given its favored relationship with the Department of Defense.

The company recently secured a $79 million contract to augment the intelligence solutions of the U.S. Army. The contract expands the scope of work for the company’s Intelligence Systems and Support market area and reinforces its position as one of the leading players in the segment.

Per the contract, CACI will provide support services to the U.S. Army Intelligence and Information Warfare Directorate that operates as the army’s research and development center. In particular, the company will offer back-up engineering support and will develop communications networks to better equip the Army to address the evolving intelligence and electronic warfare requirements. This will enable the Army to effectively counter cyber threats as well as fortify itself with thorough intelligence analysis and dissemination capabilities.

Going forward, CACI intends to assiduously grow in large markets, increase new business initiatives and leverage mergers and acquisitions to further increase its market share and create long-term value for its shareholders.

Some better-ranked stocks in the industry include CSG Systems International Inc. (CSGS - Free Report) , Ebix Inc. (EBIX - Free Report) and ManTech International Corporation (MANT - 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.

CSG Systems has beaten estimates in all the trailing four quarters for an average earnings surprise of 24.9%.

Ebix has a long-term earnings growth expectation of 10% and has beaten estimates in all the trailing four quarters for an average positive earnings surprise of 15%.

ManTech has long-term earnings growth expectation of 8% and has beaten estimates in all the trailing four quarters for an average positive earnings surprise of 8.2%.

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