SAIC wins $120 million Navy training support contract

RESTON, Va. - Science Applications (NASDAQ:SAIC) International Corp. (NASDAQ: SAIC), a prominent technology integrator, has secured a $120 million contract from Naval Supply Systems Command (NAVSUP) to provide training support for the U.S. Navy. The five-year, cost-plus fixed-fee contract will assist the Tactical Training Group Pacific’s (TTGP) mission to enhance fleet readiness through advanced tactical training.

The contract mandates SAIC to continue offering professional technical services for Fleet Synthetic Training (FST) and Live-Virtual-Constructive (LVC) war game development and execution. Additionally, SAIC will provide subject matter expert classroom instruction in warfighting doctrine and Tactics, Techniques and Procedures (TTP) utilizing government furnished training systems and facilities.

SAIC's support extends to various Navy entities, including the Expeditionary Warfare Training Group Pacific, Carrier Strike Group 15, and Tactical Training Group Pacific, Yokosuka (TTGPDY). These services are aimed at improving the proficiency of Navy personnel in war fighting and joint operations, both at sea and on land.

The company has a longstanding relationship with the U.S. Navy, providing tactical course and fleet training requirement support since 1992. SAIC's approach to scenario creation, training plans, and instructor development programs is designed to efficiently meet the evolving requirements of the TTGP while minimizing transition risks.

The contract reinforces SAIC's role in the defense sector, where it offers a range of services across the defense, space, civilian, and intelligence markets. The company, headquartered in Reston, Virginia, employs approximately 24,000 people and reports annual revenues of about $7.4 billion.

This announcement is based on a press release statement from SAIC and does not include forward-looking statements or projections. The information provided reflects the current contract award and SAIC's ongoing commitment to supporting the U.S. Navy's training missions.

In the wake of these developments, investment firm Jefferies has maintained a 'Hold' rating on SAIC stock, citing the company's strategic direction and investment plans. Science Applications International Corp (SAIC) reported solid financial performance in the first quarter of fiscal year 2025, with a revenue of $1.85 billion and an adjusted EBITDA of $166 million. SAIC also unveiled a multi-year strategy to increase its bid volume to $30 billion by fiscal year 2027.

On a similar note, TD Cowen reiterated a 'Buy' rating for SAIC, highlighting the company's high cash flow yield and the potential for growth in fiscal year 2026. These developments reflect SAIC's commitment to long-term growth and market competitiveness, despite near-term market reactions and growth concerns.

InvestingPro Insights

As SAIC secures a significant contract with the U.S. Navy, investors and industry observers are closely watching the company's financial health and market performance. According to InvestingPro data, SAIC boasts a market capitalization of $6.27 billion, reflecting its substantial presence in the technology integration sector. Despite recent revenue contraction, with a reported -6.11% revenue growth over the last twelve months as of Q1 2023, SAIC's management has been actively engaged in share buybacks, signaling confidence in the company's future prospects.

Notably, SAIC trades at a P/E ratio of 14.12, suggesting that its stock may be undervalued relative to near-term earnings growth. This is further underscored by a PEG ratio of 0.3 for the same period, indicating potential for investment value based on earnings growth expectations. In addition to its attractive valuation metrics, SAIC has a commendable track record of maintaining dividend payments for 12 consecutive years, with a dividend yield of 1.21% as of mid-2024, which could be appealing to income-focused investors.

While the company has faced challenges with weak gross profit margins, currently at 11.7%, SAIC is predicted by analysts to remain profitable this year, as it has been over the last twelve months. These financial indicators, combined with the new contract award, may suggest a stable outlook for SAIC in the defense sector. For investors seeking more comprehensive analysis, additional InvestingPro Tips are available, providing deeper insights into SAIC's performance and potential investment opportunities.

For those interested in exploring these dynamics further, InvestingPro offers a wealth of additional tips, with a total of 7 insightful tips available for SAIC at InvestingPro.

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