How Efficient Are the Services of This Service Company

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Science Applications International Corp.

SAIC (NYSE: SAI)  belongs to the service sector and is engaged in technical services industry. It provides various types of technical services and solutions to  the agencies of the U.S. Department of Defense, state agencies, local government agencies, foreign governments and customers in commercial markets as well. It also provides cyber security solutions in order to gear up for various cyber threats. SAIC announced its financial results for the third quarter of fiscal year 2013, which ended October 31st 2012, bringing forth a good investment  indication by reversing a year-ago loss of $0.28 with an earning of $0.33 per share and a net margin of 3.9%, which is 710 basis points better than the prior-year quarter.

Third quarter results

For the quarter the company reported revenue of $2.87 billion, up 3% from a year ago and diluted profits per share of 33 cents, up from a loss of 28 cents in the third quarter of fiscal year 2012. 

Income from continuing operations for the quarter was $112 million, a rise from $92 million loss in the third quarter of fiscal year 2012.

Operating income for the quarter was  approx 6.7 percent of revenue whereas prior year quarter's operating income excluding the CityTime loss provision of $232 million(relating to the CityTime workforce management contract with the City of New York) was approx 7.5 percent of revenue ;the reduction being attributable to $15 million of expenses incurred in connection with the planned separation of the company into two separate companies.

During the quarter the Company paid a cash dividend of $0.12 per share.  The Company intends to continue paying dividends on a quarterly basis.

Forward Looking

For FY 2013  the company estimates revenue of $10.9 billion to $11.4 billion, averaging around $11.16 billion and an EPS ranging between $1.49 to $1.54, averaging around $1.52.

With the expectation of constraint in government spending on the defense sector, the company plans to reduce its cost structure by resorting to downsizing measures.This will approximately impact  the jobs of 700 employees.

Viable Future Business Bookings

 

  • The Company has been awarded a task order to provide  information technology services to the U.S. Central Command's (USCENTCOM) Directorate of Command and Control Communications and Computers at a total contract value of $433 million, with a one-year base period of performance and four one-year options
  • The Company has been awarded a prime contract of providing information technology design, implementation and support services to the U.S. Army Military Intelligence Enterprise with a total contract value of approximately $149 million, with a one-year base period of performance and two one-year options
  • The Company has been awarded a major contract to provide training & delivery services to the Federal Emergency Management Agency Center for Domestic Preparedness at a total contract value of approx $52 million, with a one-year base period of performance and four one-year options
  • The Company won healthcare IT sector contracts,fuelled up by its newly acquired healthcare IT consulting businesses maxIT Healthcare and Vitalize Consulting Solutions, totalling approx $242 million in its current quarter.This acquisition depicts its increasing progress in this sector. 

Future Split

SAIC has plans to split up into two separate publicly traded companies. One company will focus on providing solutions in national security, engineering, and health markets and the other company will focus on enterprise IT and government technical services. The plan, known as  Project Gemini, is expected to be completed in the second half of the next fiscal year. The separation will lead to increase in specialization in the respective fields and an expected generation of $63 billion of revenue over the next five years.

 

Areas of Concern

CACI International (NYSE: CACI), has been recently awarded a contract worth $31 million by the U.S. Army Reserve Command since it has been an expert in providing mission-oriented training solutions for the past 50 years .The company’s Federal Civilian, advanced Healthcare, Investigative and Business Systems services are improving continuously fueled by its  acquisitions, like its recent acquisition of Emergint Technologies, these acquisitions and continuous improvements will pave the way for new growth opportunities in the developing Federal Civilian and Business Systems sector, ultimately resulting in higher return to shareholders and thus a good investment target.

ManTech International Corporation (NASDAQ: MANT) leads in providing cyber security, system engineering and logistics services. The company has won a major contract providing technical and business services to the Marine Corps Warfighting Laboratory (MCWL) worth $23 million in joint venture with Genex Systems, LLC. Though for the quarter its revenue as well as net margin decreased from its prior-year quarter. It reported a net margin of 3.8%, 90 basis points less than the prior-year quarter.

SAIC reported an EPS(ttm) of $0.54, CACI International repoted $6.05 and Man Tech reported $2.86; thus CACI International leads amongst the 3.

MY TAKE

SAIC is doing quite well in a difficult market especially with the government possibly being thrifty on defense spending in the near future. SAIC thrives to address the future uncertainties in a proper manner through various measures and has also raised its average EPS estimate from $1.34 to $1.52 in the coming fiscal year.

The company will not be negatively impacted with the uncertain future threats since it has made suitable arrangements for the same.Thus it’s a buy signal for SAIC stock.


nimi1 has no positions in the stocks mentioned above. The Motley Fool owns shares of ManTech International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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