It has been about a month since the last earnings report for SAIC (SAIC Quick QuoteSAIC - Free Report) . Shares have lost about 4.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is SAIC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Science Applications Q3 Earnings & Sales Beat Estimates

Science Applications delivered better-than-expected third-quarter fiscal 2023 results. The company reported adjusted earnings of $1.90 per share, surpassing the Zacks Consensus Estimate of $1.74. The bottom line increased 3% from the year-ago quarter’s earnings of $1.85 per share.

Revenues inched up 1% year over year to $1.91 billion and outpaced the consensus mark of $1.86 billion. The increase was primarily due to the ramp-up of new and existing contracts, partially offset by contract completions and lower accelerated amortization on certain off-market liability contracts.

Quarter in Detail

Net bookings for the fiscal third quarter were $2 billion, reflecting a book-to-bill ratio of 1.1. SAIC’s estimated backlog of signed business deals was $24.4 billion, of which $4 billion was funded.

The non-GAAP operating income increased 8% year over year to $136 million. The non-GAAP operating margin expanded 50 basis points to 7.1%.
Adjusted EBITDA decreased to $170 million from $171 million in the year-ago quarter. The adjusted EBITDA margin decreased to 8.9% from 9% in the year-ago quarter.

Balance Sheet & Cash Flow Details

Science Applications ended the fiscal third quarter with cash and cash equivalents of $53 million, down from the prior quarter’s $99 million. As of Oct 28, 2022, its long-term debt (net of the current portion) was $2.36 billion.
The company generated operating and free cash flows of $128 million and $122 million, respectively, in the third quarter.

In the fiscal third quarter, Science Applications paid out $21 million in dividends and repurchased shares worth $60 million.

Science Applications announced that its board of directors authorized a quarterly cash dividend of 37 cents per share, payable on Jan 27, 2023, to shareholders of record as of Jan 13, 2023.

Raised Fiscal 2023 Guidance

Buoyed by the stronger-than-expected third-quarter performance, Science Applications raised its revenue and earnings guidance range for fiscal 2023.

The company now anticipates revenues of approximately $7.60 billion in fiscal 2023, up from the previously forecast range of $7.50-$7.55 billion. The company now expects adjusted earnings in the band of $7.05-$7.20 per share instead of the earlier projection in the range of $7.00-$7.20.

Management expects to generate free cash flow between $500 million and $520 million in fiscal 2023 instead of the earlier forecast band of $500-$530 million. It still projects the adjusted EBITDA margin to be approximately 8.9% in fiscal 2023.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -5.18% due to these changes.

VGM Scores

Currently, SAIC has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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, SAIC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.