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On Monday, Jefferies has updated its price target for Science Applications (NASDAQ:SAIC) shares, increasing it to $148.00 from the previous $140.00. The firm has retained a Hold rating on the company's shares. This adjustment comes after discussions with SAIC's Chief Financial Officer Prabu Natarajan and Senior Vice President of Investor Relations and Treasurer Joe DeNardi.
The conversations highlighted several positive developments for SAIC, including a strong progression in bids throughout the year, with around $14.5 billion in bids to date. This performance is bolstered by the potential acceleration of targets and win rates that are surpassing expectations.
Moreover, the company anticipates organic growth of 2-3% in the second half of the year, aided by operations and maintenance expenditure catch-up and the ramp-up of the DTAMM project, as well as a $200 million extension for the USAF CBC2.
SAIC is also expecting margin expansion, which will be driven by accretive civilian projects and a robust bid pipeline. A 10 basis point improvement is projected to contribute an additional $0.12 to the base fiscal year 2025 estimated earnings per share of $8.10. Furthermore, SAIC is focusing on growing its free cash flow per share at an approximate rate of 10% per year, aiming to increase it from $9 to $12.
The company's financial outlook, as discussed by the CFO and SVP, reflects a strategic emphasis on both growth and efficiency, with a particular focus on enhancing shareholder value through careful management of bids and operational performance. The updated price target by Jefferies reflects the firm's recognition of these positive trends and the potential for continued financial improvement at SAIC.
In other recent news, Science Applications International Corp. (SAIC) has secured a significant $229 million contract from the U.S. Department of Defense. This contract is a strategic win for SAIC, which aims to enhance the IT capabilities of NORAD and USNORTHCOM. The services provided by SAIC will include the automation of existing IT systems, cloud migration, and the deployment of skilled professionals.
In the financial sphere, SAIC's recent second fiscal quarter results indicated a 2% increase in revenue and a slight 2% decrease in EBITDA. This surpassed expectations, leading to a revised fiscal year 2025 forecast predicting 3% revenue growth and 4% EBITDA growth. Jefferies has also revised their price target for SAIC from $135.00 to $140.00, reflecting these developments.
SAIC's executives expressed confidence in their strategy to drive sustainable growth, despite acknowledging risks related to contract protests and the impact of elections on their book-to-bill targets. The company aims to hit a book-to-bill ratio of 1.2x by the first half of fiscal year 2026 and a 5% organic revenue growth by the end of the same fiscal year. These recent developments indicate SAIC's strategic transition towards targeted growth areas and improved bidding processes.
InvestingPro Insights
Following Jefferies' price target update for Science Applications (NASDAQ:SAIC), a closer look at InvestingPro data and insights can offer additional context. SAIC's market capitalization stands at approximately $6.75 billion, with a forward P/E ratio of 21.93, suggesting that investors are expecting earnings growth in the future. Despite a slight decline in revenue over the last twelve months, SAIC has demonstrated a robust three-month price total return of 15.86%, indicating strong recent performance in the market.
InvestingPro Tips reveal that SAIC's management has been actively buying back shares, a sign of confidence in the company's value. Moreover, the company has a high shareholder yield and has maintained dividend payments for 12 consecutive years, which could appeal to income-focused investors. These factors, combined with a strong return over the last three months, underscore the company's stability and potential for profitability this year, as noted by analysts.
For investors seeking further insights and analysis, InvestingPro offers additional tips on SAIC, providing a more comprehensive understanding of the company's financial health and market position. With these insights, investors can make more informed decisions aligned with their investment strategies.
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