On Jun 20, Science Applications International Corp. (SAIC - Free Report) was upgraded to Zacks Rank #1 (Strong Buy). The upgrade reflects the company’s high-value contract wins and positive earnings estimate revisions.
Notably, the Zacks Consensus Estimate for fiscal 2019 earnings increased approximately 4% to $4.46 per share over the last 30 days. Similarly, for fiscal 2020, the consensus estimate increased 7.1% to $4.81 per share over the same time frame.
Moreover, Science Applications surpassed the Zacks Consensus Estimate thrice in the trailing four quarters. It has an average positive earnings surprise of 16.5%.
Science Applications is performing well on the back of new contracts from NASA, the Environmental Protection Agency (EPA) and an increased number of orders in the company’s supply chain. This is supported by the fact that the company has a TTM book-to-bill ratio of 1.4. Its revenues increased 6.5% from the year-ago quarter to $1.175 billion in first-quarter fiscal 2019.
Going ahead, higher spending as proposed in the latest federal government budget is anticipated to accelerate the pace of contract awards, which, in turn, will aid Science Applications’ top-line growth.
We are also positive about the company’s ongoing investments in differentiating solutions and platform integrations, which are expected to reap long-term benefits, though these are proving to be a drag on margins currently.
In addition, its cost-reduction program is expected to benefit the company significantly. The company’s 2018 restructuring plan, which included voluntary and involuntary terminations and consolidation of existing leased facilities, is anticipated to generate cost savings of approximately $20 million annually.