CACI International Slips to Strong Sell - Analyst Blog

By Zacks Equity Research,

Shutterstock photo

On May 20, Zacks Investment Research downgraded technical services provider CACI International Inc. ( CACI ) to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #4 (Sell), primarily due to downward estimate revisions following its modest third-quarter fiscal 2014 earnings release.

Despite the downtrend, the company still has the potential to drive the stock up. The stock is currently trading at a forward P/E of 13.5x with a PEG ratio of 1.1x and long-term earnings growth expectation of 12.5%.

Why the Downgrade?

CACI reported unimpressive third-quarter results with revenues and earnings declining year over year due to high amortization charges. On a GAAP basis, earnings were $30.8 million or $1.19 per share, down from $38.4 million or $1.62 a share in the year-earlier quarter. The year-over-year decline was primarily attributable to a reduction in revenue and a full quarter of amortization of intangibles associated with the acquisition of Six3 Systems. Earnings per share were also adversely affected by the dilutive effect of convertible notes scheduled to mature on May 1, 2014. Adjusted earnings in the reported quarter stood at $1.78 per share versus $2.08 in the year-ago quarter.

Quarterly revenues were down 0.6% year over year to $900.4 million due to delays in planned awards, lower run rates on professional services contracts and reductions in Afghanistan-related material purchases. Operating income stood at $60.5 million in the reported quarter versus $68.6 million in the year-ago quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased to $78.7 million from $83.1 million in the year-ago quarter. EBITDA margin for the quarter was 8.7% compared with 9.2% in the prior-year period.

Over the last couple of months, most of the earnings estimates for CACI were revised downward for fiscal 2014 as well as for fiscal 2015. This seems to be the fallout of lackluster results in the recently reported quarter and an insipid guidance. Given the challenging macroeconomic environment, management is not bullish for fiscal 2014. It appears that management is finding it quite onerous to battle the fiscal pressures and precarious budgetary situation - a challenging situation to grapple with at present.

Other Stocks to Consider

Other stocks that look promising and are worth looking into now include CSG Systems International Inc. ( CSGS ), iGATE Corporation ( IGTE ) and Lionbridge Technologies Inc. ( LIOX ), each carrying a Zacks Rank #2 (Buy).

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

CACI INTL A (CACI): Free Stock Analysis Report

CSG SYS INTL (CSGS): Free Stock Analysis Report

IGATE CORP (IGTE): Free Stock Analysis Report

LIONBRIDGE TECH (LIOX): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CACI , CSGS , IGTE , LIOX

More from


Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by