UPDATE: Citi Initiates Coverage On CACI International

Citi initiated coverage on CACI International Inc CACI Friday with a Neutral rating and $97 price target.

Analyst Jonathan Raviv noted that “guidance suggests CACI should trade closer to peers as it overcomes some of its historical discount driven by guidance cuts. We should also see sales grow at year-end due to a recent contract win for USG background checks.”

Raviv expected “CACI to trade at a discount to peers due to its M&A-focused deployment policy & we see balanced risk-reward as it falls short on 2/3 of our defense services investment criteria: margin & cash deployment potential. As a result, we remain on the sidelines.”

“CACI’s cyber narrative is due to Six3 (~8 percent of sales). Recent trends have disappointed due to war cuts, delays & lost competitions, but unique capabilities should position CACI as a long-term cyber play,” according to the analyst note.

The target price of $97 was based on an 8.5 percent FCF yield, a discount to Citi’s target services multiple “due to a lack of repo/dvd.”

CACI International recently traded at $85.81, down 2.44 percent.