SAIC's Portfolio Makes It Ideal For Crucial Long-Term Defense Trends, Analyst Says

Benchmark analyst Josh Sullivan reiterated a Buy on Science Applications International Corporation SAIC and raised the price target to $120 from $105.
Sullivan noted that SAIC's 3Q23 adjusted EPS of $1.90 beat the $1.73 consensus. . Top-line sales of $1.91 billion beat Street expectations at $1.86 billion. Growth was driven primarily by the ramp up on new and existing contracts.
Further, SAIC raised FY23 guidance, providing a solid preliminary FY24 outlook.
The FY27 FCF outlook assumed SAIC would grow FCF per share from >$9 in FY23 to >$14 by FY27.
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Forward-looking net bookings were $2.0 billion with a solid book-to-bill of 1.1x.
In FY24, SAIC expects to lower net leverage below 3x while executing a $250 million - $350 million share repurchase program and increasing adj EBITDA margins to 9.0% from 8.9%.
Net, net SAIC's portfolio is well aligned to key long-term Defense trends in space, cyber, electronic warfare counter-UAS, and State Department spending, benefiting backlogs and providing visibility in guidance.
Further, the analyst believes SAIC is one of the beneficiaries of Tech layoffs allowing it to staff up and execute on extensive backlogs boosting FCF.
Goldman Sachs analyst Gavin Parsons maintained a Sell and raised the price target from $83 to $94.
Price Action: SAIC shares traded higher by 0.67% at $114.72 on the last check Tuesday.

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