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Why Is CACI International (CACI) Up 0.3% Since Last Earnings Report?

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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 0.3% in that time frame, underperforming 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 Q3 Earnings Miss Estimates

CACI reported third-quarter fiscal 2020 (ended Mar 31, 2020) results, wherein earnings missed estimates but revenues beat the same.

Earnings were $3.16 per share, up 17.6% year over year. However, the bottom line missed the Zacks Consensus Estimate by 2.47%.

Revenues were $1.47 billion, up 15.9% from the year-ago quarter. The rise was primarily attributable to new business wins, acquired contracts and on-contract growth, which aided organic expansion. The top line also outpaced the consensus mark of $1.45 billion.

Quarter Details

Contract awards in the reported quarter were worth $1.4 billion, a 45.7% year-over-year decline, of which approximately 50% came from new businesses. Revenues from contract awards excluded ceiling values of multi-award, indefinite-delivery, indefinite-quantity contracts.

Total backlog, as of Mar 31, 2020, was $19.9 billion, 34% higher than the prior-year quarter. Funded backlog at the end of March was $3 billion, up 3%.

In terms of customer mix, the Department of Defense accounted for 70.8% of total revenues in the quarter. Federal Civilian Agencies contributed about 24.7%, while Commercial and other customers accounted for 4.6% of revenues.

Revenues generated as a prime contractor and a subcontractor accounted for 91.7% and 8.3% of total revenues, respectively.

Moreover, in terms of contract type, cost reimbursable type contracts fetched 58.2%, fixed-price contracts accounted for 27.7%, and time and material type contracts accounted for 14.1% of total revenues.

Margins

Operating income for the quarter came in at $113.7 million, up 19.8% from the year-ago quarter.

Operating income margin expanded 30 basis points (bps) to 7.8%. Higher interest expenses were an overhang on margins.

Adjusted EBITDA for the fiscal second quarter increased 19.9% year over year to $141.4 million. Adjusted EBITDA margin of 9.7% expanded 40 bps.

Balance Sheet and Cash Flow

At the quarter-end, CACI had cash and cash equivalents of $77.2 million compared with $68.6 million in the previous quarter.

Total long-term (net of current portion) debt was $1.46 billion.

Cash flow from operations, as of Mar 31, was $357.8 million compared with $237 million in the previous quarter. The increase was driven by growth in net income combined with lower DSO.

Guidance

CACI reiterated its guidance for fiscal 2020. Revenues are expected in the range of $5.60-$5.80 billion. Earnings per share are expected between $11.91 and $12.70.

Net income is expected in the range of $305-$325 million. Moreover, net cash provided by operating activities is expected to be at least $430 million.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, CACI International has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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.

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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