On May 20, Zacks Investment Research downgraded technical
CACI International Inc.
) 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
CSG Systems International Inc.
Lionbridge Technologies Inc.
), each carrying a Zacks Rank #2 (Buy).
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