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SAIC Q3 Earnings Beat: Will Strong FY25 Guidance Lift the Stock?

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Science Applications International (SAIC - Free Report) delivered better-than-expected third-quarter fiscal 2025 results. The company reported non-GAAP earnings of $2.61 per share for the fiscal third quarter, surpassing the Zacks Consensus Estimate of $2.17. Furthermore, the bottom line increased 15%, driven by higher revenues and effective cost management.

Science Applications’ earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, with an average surprise of 7.3%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Science Applications' fiscal third-quarter revenues rose 4.3% year over year to $1.98 billion, which marginally surpassed the Zacks Consensus Estimate of $1.93 billion. The top-line growth was primarily driven by an increase in volume on existing and new contracts, partially offset by contract completions.

Buoyed by better-than-expected third-quarter performance, Science Applications raised its guidance for the fiscal 2025. Strong third-quarter performance, along with upbeat fiscal 2025 guidance, is likely to give a fresh boost to SAIC’s share price. 

On a year-to-date basis, shares of SAIC have lost 2.8%, underperforming the Computers - IT Services industry’s return of 19%.

SAIC’s Q3 Details

Segment-wise, revenues from Defense and Intelligence, which accounted for 77% of revenues, amounted to $1.52 billion. Civilian revenues, which constitute 23% of revenues, totaled $461 million. 

Net bookings for the quarter were approximately $1.5 billion, which reflects a book-to-bill ratio of 0.7. The company’s trailing 12-month book-to-bill ratio was 0.9 at the end of the fiscal third quarter. SAIC’s estimated backlog at the end of the quarter was approximately $22.4 billion. Of the total backlog amount, approximately $4.5 billion was funded.

Selling, general and administrative (SG&A) expenses decreased 4.6% to $83 million. SG&A expenses, as a percentage of revenues, declined to 4.2% from 4.6% in the year-ago quarter.

Non-GAAP operating income increased year over year to $195 million from the year-ago quarter’s operating income of $178 million. The non-GAAP operating margin expanded 50 basis points (bps) year over year to 9.9%.

Balance Sheet & Cash Flow Details of SAIC

Science Applications ended the fiscal third quarter with cash and cash equivalents of $46 million, down from the previous quarter’s $48 million.

As of Nov. 1, 2024, Science Applications’ long-term debt (net of the current portion) was $1.94 billion compared with $1.97 billion as of Aug. 2, 2024.

The company generated operating and free cash flows of $143 million and $9 million, respectively, in the fiscal third quarter. In the first three quarters of fiscal 2025, it generated operating cash flow and free cash flow of $379 million and $263 million, respectively.

During the fiscal third quarter, Science Applications repurchased shares worth $115 million and paid $18 million in dividends.

SAIC Updates Guidance for FY25

Science Applications raised its fiscal 2025 guidance for revenues and earnings. The company now projects its fiscal 2025 revenues in the range of $7.425-$7.475 billion, up from the previous guidance of $7.35-$7.50 billion. SAIC now expects adjusted earnings in the $8.50-$8.65 range compared with the earlier guidance of $8.10-$8.30. The Zacks Consensus Estimate for fiscal 2025 revenues and non-GAAP earnings is pegged at $7.40 billion and $8.21 per share, respectively.

The company projects its adjusted EBITDA in the band of $685-$695 million and the adjusted EBITDA margin to be approximately 9.3%. SAIC expects its free cash flow in the band of $490-$510 million.

Zacks Rank & Stocks to Consider

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

Amphenol (APH - Free Report) , Agilysys (AGYS - Free Report) and AudioEye (AEYE - Free Report) are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. APH, AGYS and AEYE carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

APH shares have rallied 50.1% year to date. The Zacks Consensus Estimate for APH’s full-year 2024 earnings is pegged at $1.84 per share, up by a couple of pennies over the past 60 days, suggesting an increase of 21.9% from the year-ago quarter’s reported figure.

AGYS shares have surged 55.6% year to date. The Zacks Consensus Estimate for AGYS’ full-year fiscal 2025 earnings is pegged at $1.31 per share, up by 9.2% over the past 60 days, indicating a rise of 19.1% from the year-ago quarter’s reported figure.

AEYE shares have skyrocketed 281.9% year to date. The Zacks Consensus Estimate for AEYE’s full-year 2024 earnings is pegged at 52 cents per share, up by a couple of pennies over the past 60 days, implying a rise of 372.7% from the year-ago quarter’s reported figure.


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