Science Applications (SAIC) Q3 Earnings Miss, Improve Y/Y

Science Applications SAIC reported third-quarter fiscal 2020 earnings of $1.39 per share, missing the Zacks Consensus Estimate by 3.47%. However, the bottom line improved 2.96% year over year.

Moreover, revenues jumped 38% from the year-ago quarter to $1.6 billion but lagged the Zacks Consensus Estimate of $1.63 billion. Revenues realized from the acquisition of Engility drove the top line. Strong performance of the company’s contract portfolio is a tailwind.

However, adjusting for the impact of acquired revenues, the metric declined 1.5% due to acquisition related dis-synergies

Quarter in Detail

Net bookings for the quarter were approximately $2.2 billion, reflecting a book-to-bill ratio of approximately 1.4%.

Science Applications’ estimated backlog of signed business deals was approximately $14.5 billion of which, $2.9 billion was funded.

Adjusted operating margin contracted 40 basis points (bps) year over year to 5.8% in the reported quarter.

Adjusted EBITDA of $135 million increased 38%. Adjusted EBITDA margin was flat at 8.3%.

Science Applications International Corporation Price, Consensus and EPS Surprise

Science Applications International Corporation Price, Consensus and EPS Surprise

Science Applications International Corporation price-consensus-eps-surprise-chart | Science Applications International Corporation Quote

Balance Sheet & Cash Flow

Science Applications ended the quarter with cash and cash equivalents of $162 million, down from $179 million reported in the previous quarter.

Operating cash flow was $116 million, up from $95 million in the sequential quarter. Free cash flow was $116 million compared with $90 million in the preceding quarter.

During the quarter, Science Applications deployed $24 million of capital, $21 million to cash dividends and $3 million to debt repayment.

Guidance

For fiscal 2020, the company expects second-half revenues to be consistent with the first-half figure of $3.6 billion.

For the full fiscal, adjusted EBITDA margin is likely to be at the mid-to-upper-end of the 8.2-8.4% range.

Free cash flow is expected to be at least $425 million for fiscal 2020.

Zacks Rank & Stocks to Consider

SAIC currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Keysight Technologies Inc. KEYS, Fortinet, Inc. FTNT and CommVault Systems, Inc. CVLT, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Keysight, Fortinet and CommVault Systems is currently estimated at 9.1%, 14% and 10%, respectively.

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