Jefferies Raises SAIC Price Target, Maintains Hold on Stock
Jefferies Adjusts Price Target for Science Applications
Recently, Jefferies has made positive changes regarding its price target for Science Applications (NASDAQ: SAIC), increasing it to $148 from the previous $140. This strategic update comes after engaging in detailed discussions with the company’s Chief Financial Officer, Prabu Natarajan, and Senior Vice President of Investor Relations, Joe DeNardi.
The insights from these conversations have shed light on several optimistic developments within SAIC. Notably, the firm has been actively engaging in numerous bids throughout the year, amounting to an impressive $14.5 billion to date. What stands out is their ability to exceed expectations concerning target accelerations and win rates.
Growth Projections and Strategic Insights
Looking ahead, SAIC anticipates organic growth of 2-3% in the latter half of the year. This growth is bolstered by the catch-up of operations and maintenance expenditures and the ongoing ramp-up of the DTAMM project, alongside a notable $200 million extension for the USAF CBC2.
Furthermore, SAIC projects a favorable margin expansion driven by lucrative civilian projects and a strong pipeline of bids. Specifically, a projected 10 basis point improvement could add an additional $0.12 to the estimated earnings per share for the fiscal year 2025, which currently stands at $8.10. Also, the company is strategically focused on elevating its free cash flow per share by around 10% annually, with a goal of increasing it from $9 to $12.
Enhancing Shareholder Value
During discussions, the financial outlook expressed by SAIC’s CFO and SVP emphasized a balanced approach towards growth and operational efficiency. They are particularly committed to enhancing shareholder value through meticulous management of bids and overall performance. The updated price target set by Jefferies illustrates their acknowledgment of these promising trends and potential for ongoing financial improvement at SAIC.
New Contract Wins and Financial Performance
In recent news, Science Applications International Corp. (SAIC) achieved a remarkable milestone by securing a $229 million contract from the U.S. Department of Defense. This contract aims to bolster the IT capabilities of NORAD and USNORTHCOM, with SAIC spearheading efforts in automating existing IT systems, facilitating cloud migrations, and deploying expert professionals.
In its recent fiscal quarter report, SAIC recorded a 2% revenue increase despite a slight 2% drop in EBITDA. This performance exceeded market expectations, warranting a revised fiscal year 2025 projection, which now forecasts a 3% revenue growth along with a 4% growth in EBITDA. Following these results, Jefferies adjusted their price target for SAIC, increasing it from $135 to $140, reflecting confidence in the company’s progress.
Challenges and Future Objectives
Despite the positive outlook, SAIC's executives acknowledged potential challenges such as contract protests and the influence of election cycles on their book-to-bill targets. They are ambitiously targeting a book-to-bill ratio of 1.2x by the first half of fiscal year 2026, alongside aiming for a 5% organic revenue growth by the end of the same fiscal year. These recent developments portray SAIC's careful transition aimed at targeted growth areas and refined bidding processes.
InvestingPro Insights
Following Jefferies’ update, a closer analysis of existing data could provide valuable context. SAIC currently boasts a market capitalization of roughly $6.75 billion, with a forward P/E ratio of 21.93, indicating that investor confidence in future earnings growth remains strong. Furthermore, amid a slight revenue decline over the past year, SAIC has shown a strong three-month price total return of 15.86%, underscoring its recent market performance.
Insights from management indicate a proactive stance, with ongoing share buybacks reflecting confidence in the company's intrinsic value. Additionally, maintaining dividends consistently over the past 12 years alongside strong shareholder yield adds to its reliability for income-oriented investors. These dynamics highlight SAIC’s potential for continued profitability, validated by analysts.
Frequently Asked Questions
What did Jefferies change regarding SAIC's stock?
Jefferies raised its price target for SAIC shares to $148 while maintaining a Hold rating.
How much does SAIC expect to grow in the second half of the year?
SAIC anticipates organic growth of 2-3% in the latter half of the year.
What is the significant contract SAIC secured recently?
SAIC secured a $229 million contract from the U.S. Department of Defense to enhance IT capabilities.
What were SAIC's recent revenue changes?
SAIC reported a 2% increase in revenue for the second fiscal quarter.
What is SAIC's long-term goal regarding revenue growth?
SAIC aims for a 5% organic revenue growth by the end of the fiscal year 2026.
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