Science Applications International Corporation was hit hard today as its shares tumbled 10% in response to disappointing bottom-line results for the fourth quarter of fiscal 2024. The culprit? Adjusted earnings per share of $1.43 fell short of the mark by a mere penny, marking a 30% decline from the previous year, courtesy of reduced revenues and increased expenses.
While revenues took a 12% hit year over year, landing at $1.74 billion, the figures managed to outperform market expectations by 5.9%. Notably, the decline can be attributed to the divestment of the logistics and supply chain management division and the deconsolidation of the FSA joint venture, along with completed contracts and five extra working days in the year-ago quarter. However, these losses were somewhat offset by heightened activity in both existing and new contracts.
What about their adjusted bottom line in this topsy-turvy quarter, you ask? Adjusted EBITDA clocked in at $127 million, down 26% from the previous year. The adjusted EBITDA margin suffered a 140 basis points hit, settling at 7.3%. This downgrade was primarily due to the sale of their logistics and supply chain management division, the FSA joint venture’s deconsolidation, and the upsurge in incentive-based compensation costs.
Recovery or Regression?
The lion’s share of the quarter’s troubles can be attributed to a myriad of factors, including a 32% dip in non-GAAP operating income to $89 million and a 160 basis points plunge in the non-GAAP operating margin to 5.1%. Clearly, the road to recovery for SAIC is looking paved with obstacles.
Looking Ahead: FY25 Projections
While the immediate future may seem daunting, SAIC remains cautiously optimistic about their fiscal year 2025. The company has revised its revenue guidance range to $7.35-$7.50 billion, projecting adjusted EBITDA in the $680-$700 million range. However, the adjusted EBITDA margin has been revised downwards to 9.2%-9.4%. Still, they expect adjusted earnings per share to remain in the $8-$8.20 range and foresee generating free cash flow between $490-$510 million.
As investors brace themselves for what lies ahead, it is worth noting that SAIC’s shares have rallied 3.3% year to date, a beacon of light in an otherwise stormy sea of financial uncertainty.
Market Watch
SAIC’s current Zacks Rank #2 (Buy) status puts them at an advantage, considering the tumultuous challenges presented by the current market climate. In comparison, other stocks in the tech sector such as NVIDIA Corporation (NVDA), Meta Platforms (META), and Amazon.com (AMZN) are also making waves. NVIDIA and Meta are riding high with a Zacks Rank #1 (Strong Buy), while Amazon stands at a Zacks Rank #2. With NVDA, META, and AMZN indicating strong growth potential, it’s worth keeping a close eye on these tech giants as they navigate the unpredictable waters of the market.
It is evident that the road ahead for SAIC is riddled with challenges, but with resilience and strategic planning, the tide may soon turn in their favor.
