On Thursday, Goldman Sachs reaffirmed its Sell rating on shares of Science Applications (NASDAQ:SAIC) International Corp. (NASDAQ:SAIC) with a steady price target of $124.00. The firm recognized SAIC's third-quarter fiscal year 2025 results, which showcased revenue, adjusted EBITDA margin, and earnings per share (EPS) surpassing FactSet consensus expectations.
However, the company's free cash flow (FCF) fell short of projections. According to InvestingPro data, SAIC currently trades at a P/E ratio of 22.2x and maintains a market capitalization of $6.14 billion.
SAIC reported a year-over-year organic revenue growth of 4%, with revenue reaching $1.98 billion, above the expected $1.93 billion. The adjusted EBITDA margin improved by 60 basis points year-over-year to 10.0%, resulting in an adjusted EBITDA of $197 million, which exceeded the consensus of $181 million.
Adjusted EPS was reported at $2.61, outperforming the anticipated $2.16. InvestingPro analysis indicates the company has maintained dividend payments for 12 consecutive years, currently offering a 1.19% yield, though it suffers from weak gross profit margins.
Despite the positive earnings results, SAIC's bookings were lighter than expected, with a book-to-bill ratio of 0.7X for the quarter, lower than the last twelve months' average of 0.9X. The company's FCF for the quarter was a mere $9 million, significantly trailing the consensus estimate of $126 million and Goldman Sachs' expectation of $90 million.
Based on InvestingPro's Fair Value analysis, SAIC appears slightly undervalued at current levels. Subscribers can access 8 additional ProTips and comprehensive financial metrics in the Pro Research Report.
In response to the quarterly performance, SAIC has updated its full-year 2025 guidance. The company now anticipates revenue to be between $7.425 billion and $7.475 billion, a narrow range compared to the previous forecast of $7.35 billion to $7.50 billion. Adjusted EBITDA is expected to range from $685 million to $695 million, slightly adjusted from the former $680 million to $700 million estimate.
The EPS forecast has been raised to $8.50-$8.65, up from the earlier $8.10-$8.30 range. The FCF expectation remains unchanged at $490 million to $510 million. Moreover, SAIC has repurchased $115 million of its stock during the quarter, demonstrating management's commitment to shareholder returns through aggressive share buybacks.
In other recent news, Science Applications International Corporation (SAIC) experienced a significant surge in shares following an impressive third quarter performance. SAIC reported adjusted earnings per share of $2.61, surpassing the consensus forecast of $2.17.
Moreover, the company's revenue grew by 4.3% year-over-year, reaching $1.98 billion, exceeding the expected $1.94 billion. This positive financial trend led SAIC to raise its full-year fiscal 2025 outlook, projecting earnings per share of $8.50-$8.65, and increasing its revenue forecast to $7.425-$7.475 billion.
These recent developments are attributed to increased volume on existing and new contracts, expanding SAIC's adjusted EBITDA margin to 10% from 9.4% in the prior year period. As a result, the company expects to exceed $25 billion in contract submissions this fiscal year, marking an increase from its previous target of $22 billion.
Management anticipates this increased pipeline will lead to improved book-to-bill ratios and accelerating growth in fiscal 2026.
Finally, SAIC's board authorized a new $1.2 billion share repurchase program, representing about 20% of the company's market value. This move is seen as a reflection of SAIC's strong quarterly performance and positive future outlook as projected by the company's management.
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