Science Applications SAIC reported mixed results for second-quarter fiscal 2021, wherein its earnings topped the Zacks Consensus Estimate but revenues missed the same. Nonetheless, the company recorded year-over-year growth in both the metrics.
The company’s fiscal second-quarter adjusted earnings surged 21% year over year to $1.63 per share and surpassed the Zacks Consensus Estimate of $1.42 per share. The year-over-year upside was mainly driven by higher revenues and reduced outstanding share count.
Quarterly revenues jumped 11% from the year-ago period to $1.76 billion. Revenues realized from the acquisition of Unisys Federal mainly drove the top line. Solid performance of the company’s contract portfolio was a tailwind. Adjusting for the impact of acquired revenues, the metric inched down 0.7%. Moreover, quarterly revenues fell short of the consensus mark of $1.79 billion.
Quarter in Detail
Science Applications stated that its business was resilient to the coronavirus pandemic-induced crisis. The crisis had limited impact on its fiscal second-quarter performance. It affected quarterly revenues and adjusted EBITDA by $65 million and $8 million, respectively. The company also stated that the coronavirus crisis had an immaterial impact on its net free cash flow.
Net bookings for the fiscal second quarter were $4.6 billion, reflecting a book-to-bill ratio of 2.6. Science Applications’ estimated backlog of signed business deals was $19.4 billion, of which $3.1 billion was funded.
Non-GAAP operating income grew 14% year over year to $115 million. Moreover, non-GAAP operating margin expanded 20 basis points to 6.5% mainly due to higher revenues.
Adjusted EBITDA marginally increased year over year to $167 million from $134 million in the year-ago quarter. Moreover, adjusted EBITDA margin expanded 110 basis points to 9.5%, chiefly driven by gains associated with the resolution of certain legal and program contract matters and reduced indirect costs.
Balance Sheet & Cash Flow
Science Applications ended the fiscal second quarter with cash and cash equivalents of $197 million, down from the prior quarter’s $276 million.
The company generated operating cash flow of $104 million during the quarter and $471 million in the first half of fiscal 2021. Operating cash flow generated in the year-ago quarter and the first half of fiscal 2020 was $95 million and $273 million respectively.
The improvement reflects cash provided from operating activities of Unisys Federal and deferred payroll tax payments. Free cash flow was $90 million in the second quarter and $448 million in the first half of fiscal 2021.
During the reported quarter, Science Applications deployed $163 million of capital, which includes $21 million for dividend payments, $17 million for mandatory debt repayment and $125 million for voluntary debt repayment.
Science Applications updated its fiscal 2021 outlook. The company now anticipates revenues between $7.1 billion and $7.2 billion compared with the previous guidance of $7.1-$7.3 billion. The updated top-line guidance reflects a negative impact of $250 million from the coronavirus pandemic. Earlier, the company had projected COVID-19 pandemic to impact its fiscal 2021 revenues by $150 million.
It reaffirmed adjusted earnings in the $5.80-$6.10 per share range. However, the guided range now includes a negative impact of approximately $35 million due to the COVID-19 crisis instead of the previous forecast of $25 million negative impact.
Free cash flow is expected to meet or exceed $500 million in fiscal 2021.
Zacks Rank and Key Picks
Currently, Science Applications carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector include Apple AAPL, Lam Research Corporation LRCX and Synaptics SYNA, all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Apple, Lam Research and Synaptics is currently pegged at 10.7%, 15.4%, and 10%, respectively.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Apple Inc. (AAPL): Free Stock Analysis Report
Lam Research Corporation (LRCX): Free Stock Analysis Report
Synaptics Incorporated (SYNA): Free Stock Analysis Report
Science Applications International Corporation (SAIC): Free Stock Analysis Report
To read this article on Zacks.com click here.