SAIC Reports Q2 Increase in Revenue, Operating Cash Flow; Wells Fargo Analysts Provide Stock Recommendation

Ed Caso

Analysts at Wells Fargo Securities reiterated an outperform rating with a $92 price target for Science Applications International Corp.’s (NYSE: SAIC) stock after the government services provider announced its second quarter fiscal 2020 financial results.

Reston, Va.-based SAIC saw its Q2 revenue grow 43 percent to $1.59B, compared to the same period a year ago, due to its acquisition of rival contractor Engility. Operating cash flow for the quarter reached $95M, a $107M increase from last year, primarily driven by customer collections through multiple programs.

“While there is near-term revenue noise, the long-term outlook, particularly for free cash flow generation, remains in place,” noted WFS Senior Analyst Ed Caso and Associate Analyst Justin Donati. “We see sustained strong investor return (dividends and repurchase) over the next several years,” they added.

Both analysts have not changed their $5.40 earnings-per-share estimate for SAIC’s current fiscal year, but slightly raised their EPS projection from $6.10 to $6.20 for FY 2021 and from $7.00 to $7.15 for FY 2022.

During Q2, the company booked new and recompete contracts worth potentially more than $1B to support U.S. intelligence and national security customers. Net bookings for the quarter reached nearly $1.9B.

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