CACI International (CACI) Q3 Earnings, Revenues Top Estimates

CACI International (NYSE:CACI) 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. The Zacks Consensus Estimate is pegged at 4.46 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. The Zacks Consensus Estimate is pegged at $11.26 per share.

Conclusion

Management is positive about the impressive third-quarter results. They are trying to take up measures that will keep visibility strong with the pipeline metrics on track.

Management is pretty confident about the “forward indicators”. Current revenue composition consists of around 99% of existing business and 1% of recompeting and new business. The company is also increasing investments in advancing machine learning and artificial intelligence for improving overall efficiency.

Backed by an enhanced solutions suite, the company intends to pursue larger bids in the catered markets, which are expected to drive the top line going ahead.

Zacks Rank and Stocks to Consider

Currently, CACI International carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Micron Technology, Inc. (NASDAQ:MU) , Twitter, Inc. (NYSE:TWTR) and Lam Research Corporation (NASDAQ:LRCX) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term EPS growth rate for Micron, Twitter and Lam Research is projected to be 10%, 23.1% and 17.7%, respectively.

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