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Science Applications (SAIC) Q2 Earnings: A Beat in Store?


Science Applications International Corporation SAIC is set to report second-quarter fiscal 2019 earnings on Sep 12.

Science Applications’ earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters with an average positive surprise of 16.48%. In the last reported quarter, the company delivered a positive earnings surprise of 10.78%.

For the fiscal second quarter, the Zacks Consensus Estimate for earnings is pegged at 98 cents, reflecting 10.1% improvement from the figure reported in the year-ago quarter. For revenues, the consensus estimate stands at $1,105 million, indicating 2.5% increase from the prior-year quarter.

Let’s see how things are shaping up prior to this announcement.



Factors to Consider

Science Applications is securing back-to-back contract wins, which are perennially benefiting the company. Government’s inclination to adopt technologies that will reduce costs and improve efficiency of the system is a positive for the company.

We note that the company won major contracts and task orders throughout the fiscal second quarter. This is expected to reflect positively in the top line.

A major re-compete task order, AMCOM Task Order 33 re-compete, was stalled due to an issue raised by a competing company. However, the issue was resolved in the fiscal first quarter and the order was re-awarded to Science Applications. This task order is expected to boost bookings in the to-be-reported quarter.

Moreover, higher number of orders in its supply chain is a tailwind. Further, the company’s cost restructuring and minimizing activities are likely to take some pressure off the margins in the quarter.

However, Science Applications has to continuously invest in value drivers, which act as a hedge against competition from big players like CACI International CACI, Unisys, Accenture and like. These ongoing investments in differentiating solutions and platform integrations, which are expected to reap long-term benefits, are expected to continue to be a drag on margins.

What the Zacks Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Science Applications currently carries a Zacks Rank #3, with an Earnings ESP of +0.68%.

Other Stocks With a Favorable Combination

Here are couple of other stocks, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Synnex CorporationSNX has an Earnings ESP of +0.13% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jabil, Inc. JBL has an Earnings ESP of +3.82% and carries a Zacks Rank of 3.

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