SAIC's Portfolio Makes It Ideal For Crucial Long-Term Defense Trends, Analyst Says

  • Benchmark analyst Josh Sullivan reiterated a Buy on Science Applications International Corporation SAIC and raised the price target to $120 from $105.
  • Sullivan noted that SAIC's 3Q23 adjusted EPS of $1.90 beat the $1.73 consensus. . Top-line sales of $1.91 billion beat Street expectations at $1.86 billion. Growth was driven primarily by the ramp up on new and existing contracts.
  • Further, SAIC raised FY23 guidance, providing a solid preliminary FY24 outlook. 
  • The FY27 FCF outlook assumed SAIC would grow FCF per share from >$9 in FY23 to >$14 by FY27. 
  • Related: War Winners: Why The Defense Contracting Business Is Thriving
  • Forward-looking net bookings were $2.0 billion with a solid book-to-bill of 1.1x. 
  • In FY24, SAIC expects to lower net leverage below 3x while executing a $250 million - $350 million share repurchase program and increasing adj EBITDA margins to 9.0% from 8.9%. 
  • Net, net SAIC's portfolio is well aligned to key long-term Defense trends in space, cyber, electronic warfare counter-UAS, and State Department spending, benefiting backlogs and providing visibility in guidance. 
  • Further, the analyst believes SAIC is one of the beneficiaries of Tech layoffs allowing it to staff up and execute on extensive backlogs boosting FCF.
  • Goldman Sachs analyst Gavin Parsons maintained a Sell and raised the price target from $83 to $94.
  • Price Action: SAIC shares traded higher by 0.67% at $114.72 on the last check Tuesday.
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