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SAIC Q2 Earnings Beat: Will Strong FY25 Guidance Lift Shares?
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Science Applications International Corporation (SAIC - Free Report) reported better-than-expected results for the second quarter of fiscal 2025. The company’s second-quarter adjusted earnings remained flat on a year-over-year basis at $2.05 per share and surpassed the Zacks Consensus Estimate of $1.86.
Considering better-than-expected second-quarter performance, SAIC initiated a strong fiscal guidance for 2025. The stock has gained 8.8% in the year-to-date period. We expect its share price to improve, given the strong guidance.
SAIC’s Top-Line Details
Revenues increased 1.9% year over year to $1.82 billion and surpassed the consensus mark of $1.8 billion. The rise in revenues was due to organic growth and new business wins, offset by the challenges of contract transition.
Adjusted EBITDA was $170 million, down 2% year over year. The adjusted EBITDA margin contracted 40 basis points (bps) on a year-over-year basis to 9.4%.
Effective Feb. 3, 2024, Science Applications reorganized its business structure and replaced the previous two operations with five new customer-facing business groups, supported by enterprise organizations, such as the Innovation Factory.
The five groups representing SAIC's operating segments have been combined into two reportable segments, Defense and Intelligence, and Civilian, based on their similar economic and qualitative characteristics and the nature of the customers.
Science Applications International Corporation Price, Consensus and EPS Surprise
Net bookings for the fiscal second quarter were $1.2 billion, reflecting a book-to-bill ratio of 0.6. SAIC’s estimated backlog of signed business deals was $22.9 billion at the end of the fiscal second quarter, of which $4.2 billion was funded.
Selling, general and administrative (SG&A) expenses decreased 12.5% to $77 million. SG&A expenses, as a percentage of revenues, declined to 4.2% from 4.9% in the year-ago quarter.
Non-GAAP operating income marginally increased year over year to $164 million from the year-ago quarter’s operating income of $163 million. The non-GAAP operating margin contracted 10 bps year over year to 9%.
Balance Sheet & Cash Flow Details of SAIC
Science Applications ended the fiscal second quarter with cash and cash equivalents of $48 million, down from the previous quarter’s $49 million.
As of Aug. 2, 2024, Science Applications’ long-term debt (net of the current portion) was $1.97 billion compared with $1.99 billion as of May 3, 2024.
The company generated operating and free cash flows of $138 million and $241 million, respectively, in the fiscal second quarter.
SAIC Reaffirms FY25 Guidance
Science Applications reiterated its fiscal 2025 guidance for revenues. The company projects its fiscal 2025 revenues in the range of $7.35-$7.50 billion. SAIC now expects adjusted earnings in the range of $8.10-$8.30 compared with the earlier guidance of $8-$8.20. The Zacks Consensus Estimate for fiscal 2025 revenues and non-GAAP earnings is pegged at $7.43 billion and $8.06 per share, respectively.
The company projects its adjusted EBITDA in the band of $680-$700 million and the adjusted EBITDA margin in the range of 9.2-9.4%. SAIC expects its free cash flow in the band of $490-$510 million.
Zacks Rank & Stocks to Consider
Science Applications currently carries a Zacks Rank #4 (Sell).
The consensus mark for Aspen’s 2025 earnings has been revised upward by 70 cents to $7.43 per share over the past 30 days, indicating a 12.8% year-over-year increase. It has a long-term earnings growth expectation of 13.1%. The stock has gained 3.9% year to date.
The Zacks Consensus Estimate for Celestica’s 2024 earnings has been revised upward by 33 cents to $3.65 per share in the past 30 days, suggesting year-over-year growth of 50.2%. Shares of Celestica have jumped 56.8% year to date.
The Zacks Consensus Estimate for Arista’s 2024 earnings has been revised upward by 32 cents to $8.24 per share in the past 60 days, indicating an increase of 16% on a year-over-year basis. Shares of ANET have jumped 39.5% year to date. It has a long-term earnings growth expectation of 17.2%.
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SAIC Q2 Earnings Beat: Will Strong FY25 Guidance Lift Shares?
Science Applications International Corporation (SAIC - Free Report) reported better-than-expected results for the second quarter of fiscal 2025. The company’s second-quarter adjusted earnings remained flat on a year-over-year basis at $2.05 per share and surpassed the Zacks Consensus Estimate of $1.86.
Considering better-than-expected second-quarter performance, SAIC initiated a strong fiscal guidance for 2025. The stock has gained 8.8% in the year-to-date period. We expect its share price to improve, given the strong guidance.
SAIC’s Top-Line Details
Revenues increased 1.9% year over year to $1.82 billion and surpassed the consensus mark of $1.8 billion. The rise in revenues was due to organic growth and new business wins, offset by the challenges of contract transition.
Adjusted EBITDA was $170 million, down 2% year over year. The adjusted EBITDA margin contracted 40 basis points (bps) on a year-over-year basis to 9.4%.
Effective Feb. 3, 2024, Science Applications reorganized its business structure and replaced the previous two operations with five new customer-facing business groups, supported by enterprise organizations, such as the Innovation Factory.
The five groups representing SAIC's operating segments have been combined into two reportable segments, Defense and Intelligence, and Civilian, based on their similar economic and qualitative characteristics and the nature of the customers.
Science Applications International Corporation Price, Consensus and EPS Surprise
Science Applications International Corporation price-consensus-eps-surprise-chart | Science Applications International Corporation Quote
SAIC’s Quarter in Detail
Net bookings for the fiscal second quarter were $1.2 billion, reflecting a book-to-bill ratio of 0.6. SAIC’s estimated backlog of signed business deals was $22.9 billion at the end of the fiscal second quarter, of which $4.2 billion was funded.
Selling, general and administrative (SG&A) expenses decreased 12.5% to $77 million. SG&A expenses, as a percentage of revenues, declined to 4.2% from 4.9% in the year-ago quarter.
Non-GAAP operating income marginally increased year over year to $164 million from the year-ago quarter’s operating income of $163 million. The non-GAAP operating margin contracted 10 bps year over year to 9%.
Balance Sheet & Cash Flow Details of SAIC
Science Applications ended the fiscal second quarter with cash and cash equivalents of $48 million, down from the previous quarter’s $49 million.
As of Aug. 2, 2024, Science Applications’ long-term debt (net of the current portion) was $1.97 billion compared with $1.99 billion as of May 3, 2024.
The company generated operating and free cash flows of $138 million and $241 million, respectively, in the fiscal second quarter.
SAIC Reaffirms FY25 Guidance
Science Applications reiterated its fiscal 2025 guidance for revenues. The company projects its fiscal 2025 revenues in the range of $7.35-$7.50 billion. SAIC now expects adjusted earnings in the range of $8.10-$8.30 compared with the earlier guidance of $8-$8.20. The Zacks Consensus Estimate for fiscal 2025 revenues and non-GAAP earnings is pegged at $7.43 billion and $8.06 per share, respectively.
The company projects its adjusted EBITDA in the band of $680-$700 million and the adjusted EBITDA margin in the range of 9.2-9.4%. SAIC expects its free cash flow in the band of $490-$510 million.
Zacks Rank & Stocks to Consider
Science Applications currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Aspen Technology (AZPN - Free Report) , Celestica (CLS - Free Report) and Arista Networks (ANET - Free Report) . While AZPN and CLS sport a Zacks Rank #1 (Strong Buy) each, ANET carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for Aspen’s 2025 earnings has been revised upward by 70 cents to $7.43 per share over the past 30 days, indicating a 12.8% year-over-year increase. It has a long-term earnings growth expectation of 13.1%. The stock has gained 3.9% year to date.
The Zacks Consensus Estimate for Celestica’s 2024 earnings has been revised upward by 33 cents to $3.65 per share in the past 30 days, suggesting year-over-year growth of 50.2%. Shares of Celestica have jumped 56.8% year to date.
The Zacks Consensus Estimate for Arista’s 2024 earnings has been revised upward by 32 cents to $8.24 per share in the past 60 days, indicating an increase of 16% on a year-over-year basis. Shares of ANET have jumped 39.5% year to date. It has a long-term earnings growth expectation of 17.2%.