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CACI International (CACI) Up 13.6% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for CACI International, Inc. (CACI - Free Report) . Shares have added about 13.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is CACI due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

CACI International Q3 Earnings, Revenues Top Estimates

CACI International reported solid third-quarter fiscal 2018 results with healthy year-over-year increase in both earnings and revenues. The company benefited from organic revenue growth and expanding margins.

GAAP earnings for the reported quarter were $64.5 million or $2.56 per share compared with $40.4 million or $1.61 per share in the prior-year quarter. The significant year-over-year increase in GAAP earnings was primarily due to better execution of programs, notably, fixed price programs, and other one-time items including incentives..

Excluding the tax impact, earnings for the reported quarter were $2.33 per share compared with $1.61 in the year-ago quarter. The Zacks Consensus Estimate was $1.80.

Quarterly revenues were $1,241.1 million compared with $1,086.4 million in the year-ago quarter. The 3.5% revenue growth was primarily attributable to 2.7% organic growth, which increased for the fifth consecutive quarter. New business wins and on-contract growth aided organic growth. During the quarter, the company won 10 large contracts within $50 million and $150 million. The reported revenues exceeded the Zacks Consensus Estimate of $1,122 million.

Other Significant Details

Contract awards in the reported quarter were $1.4 billion, of which approximately 40% came from new businesses. Contract funding orders were $1.1 billion in the quarter. Total backlog as of Mar 31, 2018 was $11 billion. Funded backlog in Mar 31, 2018 was $1.9 billion.

In terms of customer mix, the Department of Defense accounted for about 66.5% of total revenues in the reported quarter. Federal Civilian Agencies contributed about 26.6% while Commercial and other customers accounted for 6.9% of revenues.

Operating income for the quarter came in at $104.8 million with a 55.7% increase from the year-ago quarter. Operating margin increased 225 basis points (bps) to 8.4% on the back of improving efficiency. Proper execution and performance of “fixed price and fixed unit price contracts, product sales and one-time incentive fees” aided growth.

Balance Sheet and Cash Flow

At quarter end, CACI International had cash and cash equivalents of $55.9 million with long-term debt (net of current portion) of $989.5 million.

Net cash from operations for the first nine months of fiscal 2018 was $254.5 million compared with $216.5 million a year ago.

Guidance

CACI International reiterated its guidance for fiscal 2018 that it updated on Mar 18 on the back of its impressive performance in the quarter. Revenues are expected in the range of $4.4-$4.5 billion.

Net income is expected in the range of $285-$291 million, up from $277-$283 million expected earlier. Earnings per share are expected in the range of $11.26- $11.50 compared with the previous expectation of $10.95-$11.19.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to seven lower.

VGM Scores

At this time, CACI has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. The stock was allocated a grade of A on the value side, putting it in the top 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.

Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for growth and to a lesser degree momentum.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, CACI has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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