Science Applications (SAIC) Hits 52-Week High On Deal Win

Shares of Science Applications International Corporation (NYSE:SAIC) hit a new 52-week high of $61.93 on Jun 13, eventually closing at $58.56. The shares have been particularly buoyant in recent times, jumping 10.3% over the past one month. The closing share price also represents a decent one-year return of 12.7% and a year-to-date return of 27.9%.

The price increase was supported by a significant rise in share volume. Average volume of shares traded over the last 10 days (422K) increased substantially from the 278k average volume of shares traded over the last three months.

What is Driving the Stock Upward?

SAIC provides technical, engineering and enterprise IT services in the U.S., with its government segment serving the U.S. federal, state and local government agencies as well as foreign governments. Since its inception in 1969, SAIC has utilized its domain knowledge to solve critically important problems of the country in areas such as national security, energy and the environment, critical infrastructure, and health.

A few months back, SAIC secured a contract from the U.S army to provide logistics support services to the Joint Program Executive Office for Chemical and Biological Defense (JPEO-CBD).

SAIC is one of the total of 17 awardees for the indefinite delivery, indefinite quantity contract valued at a total of $900 million. To meet global force readiness requirements, SAIC will use its expertise in the fields of logistics, supply chain and CBRNE (Chemical, Biological, Radiological, Nuclear, and Explosives) for providing solutions to joint project managers of JPEO-CBD.

Moving forward, SAIC’s revenues are expected to benefit from the current contract. The company has a huge pipeline of new projects and continues to win deals at regular intervals. These contracts are key growth catalysts for the company.

With respect to earnings surprise, this Zacks Rank #2 (Buy) stock has surpassed the Zacks Consensus Estimate in two out of the last four quarters with an average surprise of 4.6%.

Moreover, the stock looks attractive from a valuation perspective. This is because SAIC currently trades at a forward P/E of 17.97x as against the industry group average of 24.50x, which signifies a huge upward potential.

A bright overall trend resulted in upward estimate revisions for SAIC. Over the last 60 days, one estimate for SAIC was revised upward for fiscal 2017. The Zacks Consensus Estimate for fiscal 2017 went up by one cent to $3.19 per share over the same time frame.

However, competition from companies such as Accenture plc (NYSE:ACN) and Booz Allen Hamilton Holding Corporation remains a headwind.

Stocks to Consider

A couple of stocks worth considering in the broader technology sector include Paylocity Holding Corporation (NASDAQ:PCTY) and Facebook, Inc. (NASDAQ:FB) . Both the stocks sport a Zacks Rank #1 (Strong Buy).