CACI International (CACI) Up 13.6% Since Earnings Report: Can This Continue?

A month has passed since the company’s last earnings report CACI International, Inc. CACI. Shares are up about 13.6% in that time.

Will the recent positive trend continue until its next earnings release, or is CACI headed for a recession? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

CACI International’s third quarter earnings and revenues – best estimates

CACI International reported solid results for the third quarter of fiscal 2018, with significant year-over-year growth in both earnings and revenues. The company benefited from organic revenue growth and rising margins.

GAAP earnings for the reported quarter were $64.5 million, or $2.56 per share, compared to $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 improved program execution, particularly fixed-price programs, and other one-time items, including incentives.

Excluding tax impacts, earnings for the reported quarter were $2.33 per share compared to $1.61 in the year-ago quarter. The Zacks Consensus Estimate was $1.80.

Quarterly revenue was $1,241.1 million compared to $1,086.4 million in the same quarter last year. Revenue growth of 3.5% is primarily due to organic growth of 2.7%, which increased for the fifth consecutive quarter. New customer acquisition and contract growth helped drive organic growth. During the quarter, the company won 10 large contracts worth between $50 million and $150 million. Reported revenues topped the Zacks Consensus Estimate of $1,122 million.

Other relevant details

The value of contracts awarded in the reported quarter was $1.4 billion, of which approximately 40% came from new businesses. Contract financing orders totaled $1.1 billion in the quarter. Total backlog as of March 31, 2018 was $11 billion. Funded backlog as of March 31, 2018 was $1.9 billion.

In terms of customer mix, the Department of Defense accounted for approximately 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 revenue.

Operating income for the quarter was $104.8 million, up 55.7% from the prior-year quarter. Operating margin increased 225 basis points (bps) to 8.4% due to improved efficiency. Good execution and performance of “fixed-price and fixed-unit contracts, product sales, and one-time incentive fees” supported growth.

Balance sheet and cash flow

At the end of the quarter, CACI International had cash and cash equivalents of USD 55.9 million, and long-term debt (net of the current portion) amounted to USD 989.5 million.

Net cash provided by operating activities for the first nine months of fiscal 2018 was $254.5 million compared with $216.5 million a year ago.

Conductivity

CACI International reiterated its fiscal 2018 guidance, which it updated on March 18 following impressive quarterly results. Revenue is expected to be between $4.4 billion and $4.5 billion.

Net income is expected to be $285 million to $291 million, up from $277 million to $283 million previously expected. Earnings per share are expected to be in the range of $11.26-$11.50, compared to previous expectations of $10.95-$11.19.

How have estimates changed since then?

Over the last month, investors have witnessed a downward trend in new estimates. There was one upward revision compared to seven lower revisions in the current quarter.

CACI International, Inc. Price and consensus

CACI International, Inc. Price and consensus | Quote from CACI International, Inc

VGM results

At this point, CACI has a solid growth score of B, although it lags slightly on its C-rated momentum. The stock is rated an A on the value side, putting it in the top quintile of this investment strategy.

Overall, the company’s total VGM score is A. Unless you’re focused on a single strategy, this score should interest you.

Our results show that this company is suitable primarily for value investors, as well as for those who expect growth and, to a lesser extent, dynamics.

Perspectives

Estimates for the stock have generally been trending lower, and the magnitude of these revisions indicates a shift to the downside. Notably, CACI has a Zacks Rank of #2 (Buy). We expect an above-average rate of return on shares in the coming months.

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