This afternoon, following worse than expected Q2 earnings, shares of IT services firm Science Applications (SAIC 62.59, -12.07 -16.2%) trade to multi-month lows.
Simply put, SAIC’s earnings slip was exacerbated by revenues which barely met market expectations. Exactly, SAIC’s Q2 EPS came in at $0.80 with revenues falling 1.6% compared to a year ago to $1.08 billion.
The revenue decline was mostly due to completion of contracts ($37 million), including the loss of an IT integration contract supporting the Department of Homeland Security (DHS) ($13 million), and other net contract declines across SAIC’s portfolio ($21 million). These decreases were partially offset by higher revenue on new information technology contracts supporting the U.S. Army and federal civilian agencies ($30 million) and higher revenue on platform integration programs ($11 million). The company’s internal revenue contraction for the second quarter was 1.4%.
Net bookings for the quarter were about $2.1 billion, which reflects a book-to-bill ratio of about 2.0. Bookings were substantially comprised of re-compete awards during the quarter. SAIC’s estimated backlog of signed business orders at the end of the quarter was about $9.2 billion of which $1.8 billion was funded.
You probably wouldn’t know it by looking at the daily chart for SAIC, but the stock was down a clean 12% YTD ahead of the print last night. Shares have seemingly been content with the steady decline as buyers stepped in only in mid-June ahead of the then-Q1 report.
While bookings remain strong, the lack of buyers and an earnings miss push the stock lower today. At about 17x forecasted full year earnings, the stock still trades at a healthy premium but more affordable than peers like Mantech (MANT, about 26x earnings) and CACI Intl (CACI, about 20x earnings).