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On Monday, Jefferies analysts adjusted their outlook on Science Applications (NASDAQ:SAIC) International Corp. (NASDAQ: SAIC), reducing the stock’s price target to $115 from the previous $130, while maintaining a Hold rating. This adjustment comes after the company reported a 5% earnings per share miss relative to consensus on profitability, contributing to a 15% drop in shares. According to InvestingPro data, four analysts have recently revised their earnings estimates downward, with the stock now trading near its 52-week low at a P/E ratio of 13.7x. Analysis from InvestingPro suggests the stock may be undervalued at current levels.
The analysts noted that despite the disappointing earnings, the company’s organic growth of 1.6% was better than anticipated. However, they expressed concerns over the company’s reliance on achieving 4-5 percentage points of on-contract growth for the full year, which is above typical levels. This growth expectation compares to the 3.5 percentage points recorded during the first fiscal quarter. Recent data shows the company’s revenue growth at 0.47% over the last twelve months, with a gross profit margin of 11.93%.
Jefferies also highlighted the need for a significant increase in profit margins, from 8.4% in the first quarter to 9.4% for the entire year, as part of the company’s strategy to meet its financial targets. The analysts maintained their earnings estimate of $9.25 but cited uncertainty as a reason for the lowered price target.
The revised price target reflects a 36% discount to the market’s fiscal year two price-to-earnings ratio, compared to the company’s three-year average of 9%. This adjustment underscores the challenges Science Applications faces in achieving its projected growth and profitability targets.
In other recent news, Science Applications International Corp (SAIC) reported its first-quarter 2025 financial results, revealing a slight revenue growth but a miss on earnings per share (EPS) forecasts. The company posted an EPS of $1.92, falling short of the expected $2.16, while revenue stood at $1.88 billion, aligning with forecasts and showing a 2% growth year-over-year. SAIC’s net bookings reached $2.4 billion, with a book-to-bill ratio of 1.3x, indicating steady demand for its services. The company continues to expand its capabilities in digital engineering and secure cloud solutions, evidenced by a recent $55 million mission integration contract with the Space Development Agency. Analysts from firms like UBS and Cowen have noted the competitive procurement environment, which could pressure margins. Despite these challenges, SAIC projects fiscal year 2026 revenue between $7.6 billion and $7.75 billion, anticipating a 2.5% organic growth. The company expects adjusted EPS to range from $9.1 to $9.3, with free cash flow guidance set between $510 million and $530 million.
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