Citigroup: Defense Woes Hurt Science Applications International

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Science Applications International Corp's SAIC dependence on U.S. defense spending will keep sales growth at bay until 2017, an analyst said Friday.

The computer security company got 90 percent of its 2014 revenue from the U.S. government, including 70 percent from the Department of Defense.

Citigroup's Jonathan Raviv launched coverage on Science Applications with a Neutral rating and $53 target, saying prospects for a higher stock price are hurt by Science Applications' growth outlook.

Up more than 56 percent year-to-date, Science Applications traded recently at $51.61, down 1 percent.

Analysts on average expect sales in 2016 will increase 1.5 percent to $3.92 billion.

Raviv said budget pressures in Congress plus turbulence caused by continued fallout from the 2013 sequestration rules will retard Science Application's potential growth until at least 2017.

Science Applications' relatively low capital spending helps it throw off generous amounts of cash to shareholders, "but it misses the mark in terms of margins and valuation potential," Raviv said.

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Posted In: Analyst ColorPrice TargetInitiationAnalyst RatingsCitigroupJonathan Raviv
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