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CACI International (CACI) Up 6.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for CACI International (CACI - Free Report) . Shares have added about 6.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CACI International 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 Reports Q4 Results

CACI reported fourth-quarter fiscal 2019 (ended Jun 30, 2019) results, wherein earnings and revenues missed estimates. However, both the figures increased year over year.

Earnings were $1.96 per share, up from $1.84 in the year-ago quarter. The bottom line, however, missed the Zacks Consensus Estimate of $2.12. A one-time investment of $13 million for IT security, along with other expenses, kept the bottom line under pressure. Higher interest expense from increased debt levels associated with recent acquisitions was also an overhang.


Revenues were $1.37 billion, up 17.4% from the year-ago quarter. The rise was primarily attributable to new business wins, acquired contracts and on-contract growth, which aided organic expansion. However, the top line lagged the consensus estimate of $1.38 billion. Adoption of ASC 606 spread award fees throughout the year, reducing the award fees in the fiscal fourth quarter by $7 million year over year.

Quarter Details

Contract awards in the reported quarter were worth $3.74 billion, up a whopping 142.6% year over year, of which approximately 61% came from new businesses. Revenues from contract awards excluded ceiling values of multi-award, indefinite delivery, indefinite quantity contracts.

Contract funding orders were $1.4 billion, down 1.3%.

Total backlog as of Jun 30, 2019 was $16.9 billion, 50% higher than prior-year quarter. Funded backlog at the end of June was $2.9 billion, up 36%.

In terms of customer mix, the Department of Defense accounted for about 69.1% of total revenues in the quarter. Federal Civilian Agencies contributed about 26.6% while Commercial and other customers accounted for 4.3% of revenues.

During the quarter, CACI secured several notable contracts. These included a seven-year, $880 million task order to provide IT and engineering services to the U.S. Army; and a five-year, $645 million task order to provide IT services in support of U.S. European and African Commands.

Margins

Operating income for the quarter came in at $81.1 million, up 0.9% from the year-ago quarter.

Operating income margin contracted 100 basis points (bps) to 5.9%.

Adjusted EBITDA for the fiscal fourth quarter increased 8.2% year over year to $108.9 million.  Adjusted EBITDA margin of 7.9% contracted 70 bps.

Balance Sheet and Cash Flow

At the quarter end, CACI had cash and cash equivalents of $72 million compared with $93.8 million in the previous quarter.

Total long-term (net of current portion) debt was $1.62 billion.

Cash flow from operations as of Jun 30, 2019, was $555.3 million compared with $452.8 million in the previous quarter.

Guidance

CACI reiterated its guidance for fiscal 2020. Revenues are expected in the range of $5.5 billion to $5.7 billion.

Net income is now expected in the range of $295-$315 million.

Earnings per share are expected to be between $11.52 and $12.30.

The buyouts of LGS and Mastodon, when combined with CACI’s capabilities, are expected to enable the company to provide products and solutions that address robust requirements in the areas of signals intelligence and spectrum management, electronic warfare, communications, C4ISR and cyber defense.

For the first quarter of fiscal 2020, modest net income growth is expected.

LGS and Mastodon are expected to contribute around $18 million of EBITDA in the fiscal first quarter. However, additional intangible amortization and interest expenses are expected to keep the acquired companies from contributing to earnings.

The company expects accelerating organic revenue growth and continued margin expansion throughout 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -10.34% due to these changes.

VGM Scores

At this time, CACI International has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CACI International has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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