CACI International Downgraded By Wells Fargo After Below Par Guidance

Wells Fargo has downgraded CACI International Inc CACI to Market Perform from Outperform after the company issued lower-than-expected fiscal 2017 outlook.

CACI, a provider of IT and other services to the U.S. federal government, guided FY17 EPS of $6.02–$6.43 on revenue of $4.050 billion–$4.250 billion. The midpoint of the outlook ($6.22/$4.15 billion) came in below the Street's forecast of $6.50 EPS and $4.40 billion revenue and Wells Fargo's estimate of $6.65/$4.46 billion.

The disappointing guidance implies another year of organic declines and comes on the back of the company's third-quarter earnings miss.

Related Link: Citi Says CACI International Shares Should Find Support At $90

"Initial FY17 guide disappointed as mid-point implies revenue down 5 percent organically versus decline of 1 percent assumed in FY16 guidance," analyst Ed Caso wrote in a note.

"The underperformance is primarily due to: 1) reduced (lower margin) pass-through revenue (indicated as about $100–150 multi-million headwind or 3pts. of growth), and 2) low-end services work up for recomplete that CACI did not aggressively bid and subsequently lost (magnitude not explicitly quantified)," Caso added.

As such, Caso cut the FY17 EPS view to $6.18 and revenue estimate to $4.16 billion. The analyst also slashed the valuation range to $90.00–$92.00 from $108.00–$111.0.

Shares of CACI closed Thursday's trading down 8.47 percent at $90.89.

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Posted In: Analyst ColorLong IdeasNewsGuidanceDowngradesPrice TargetAnalyst RatingsMoversTechTrading IdeasEd CasoWells Fargo
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