Science Applications Drops 11% On 4Q Sales Miss, Dim FY22 Outlook

Shares of Science Applications International Corporation fell 11.1% in Thursday’s extended trading session after the company reported 4Q revenues that fell short of analysts’ expectations. Furthermore, the consulting services provider’s FY22 outlook also missed the Street’s estimates.

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Science Applications (SAIC) reported revenues of $1.72 billion, which missed analysts’ estimates of $1.78 billion. However, top-line results marked an 11% year-over-year improvement mainly driven by the acquisition of Unisys Federal, which partially offset negative impacts of the COVID-19 pandemic.

Adjusted earnings increased 6% to $1.67 per share and beat consensus estimates of $1.44.

Net bookings were $0.7 billion in 4Q, reflecting a book-to-bill ratio of 0.4. SAIC’s net bookings in fiscal 2021 stood at $11.9 billion, representing a book-to-bill ratio of 1.7. It ended fiscal 2021 with an estimated backlog of about $21.5 billion.

The company’s CEO Nazzic Keene said, “SAIC has made rapid advancements to the business portfolio, financial profile, and return of capital over the past several years. And despite a challenging fiscal year 2021, SAIC continued that journey.” She further added, “Fourth quarter and full year results demonstrate our focus; revenue growth, margin expansion, and strong cash generation to be deployed for long-term shareholder value creation.”

Concurrent with the earnings release, the company announced that its board of directors declared a quarterly cash dividend of $0.37 per share, representing an annualized dividend yield of 1.5%.

For fiscal 2022, SAIC expects to generate revenues in the range of $7.1-$7.3 billion, which is lower than analysts’ forecasts of $7.63 billion. Its adjusted earnings guidance range of $6-$6.25 per share also fell short of Street estimates of $7.21. (See Science Applications stock analysis on TipRanks)

Following the earnings announcement, Cowen analyst Cai Rumohr reiterated a Buy rating and price target of $111 (17.1% upside potential) on the stock.

In a note to investors, Rumohr wrote, “Q4 beat was overshadowed by disappointing FY22 guide well below Street’s revenue and EPS. But bookings look better than optics suggest, and guide seems conservative. Given SAIC reported AMC (After Market Close), we expect the stock to open off — by at least 5%. But given its 8% FY22 cash flow yield and still solid business capture gains, we view any stock price weakness as a unique buying opportunity.”

Overall, the Street has a Strong Buy consensus rating on the stock based on 3 unanimous Buys. The average analyst price target of $111 implies upside potential of about 15.8% to current levels. Shares have gained about 55.5% in one year.