Neutral on CACI International - Analyst Blog
08 Giugno 2012 - 1:00PM
Zacks
We retain our Neutral
recommendation on CACI International, Inc. (CACI).
Even with major contract wins accruing during the last quarter, the
company was unable to placate us from fears emanating from issues
such as outlook decline and over-dependence on the Department of
Defense (DoD).
The company has been on a spree of
winning contracts perennially over the last few months. These
amounted to nearly $547 million during the third quarter of fiscal
2012. Not only do these add to revenue prospects of the company but
also help in building effective relationships ossified with
multi-year projects.
CACI International’s expertise in
making strategic acquisitions has proved effectively fruitful over
time. Even though management did not indulge in acquiring any
businesses of late, the company reported generating $28 million
revenues accrued from acquired businesses in its third fiscal
quarter.
Cyber threats have been looming
large over quite sometime due to which the demand for solutions and
protective devices have surged comprehensively too. This growing
menace has fuelled the growth prospects for CACI International in
the industry making it an attractive option for all organizations
seeking such services. The ongoing relationship it retains with the
DoD is its biggest panegyric in this regard.
This, however, has an unfavorable
side to the picture. A major budget cut is expected to occur in
2013 by the U.S. Congress. With CACI International deriving almost
77.5% and 17.2% of revenues, from the DoD and Federal Civilian
Agencies, respectively, in the last fiscal quarter declared, the
adverse outcome of budget cuts might deteriorate gains
comprehensively as the company moves ahead in the upcoming year.
Hence, it would be wise for CACI to mitigate its dependence on
Government contracts as far as practicable in order to steer away
from fiscal pressures on its performance.
Management has already reported a
decline in revenue projections for full fiscal year 2012, dropping
from an earlier expectation of $3,850 million - $4,050 million to
now fall within $3,730 million - $3,830 million. Such a realistic
stance can aver that management is not looking too hopeful at
present about its final quarter yields of fiscal 2012.
One aspect which continually proves
ominous to the company is the fierce competition it faces in the
industry. So, a wary eye needs to be kept for any form of advances
made by big players such as Syntel, Inc. (SYNT)
and Ebix Inc. (EBIX).
Hence, judging by the precarious
climate the company is experiencing, we find it wise to maintain a
sideline stance for the time being. In the short run, we have a
Zacks #3 Rank on the stock which translates into a short-term
‘Hold’ rating.
CACI INTL A (CACI): Free Stock Analysis Report
EBIX INC (EBIX): Free Stock Analysis Report
SYNTEL INC (SYNT): Free Stock Analysis Report
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