SAN DIEGO: Defense contractor Science Applications International Corp. continued to see revenue growth in the final quarter of the year, buoyed by its acquisition of Scitor Holdings, with earnings handily beating expectations.
Shares surged 7.6% to $50.10 in morning trading.
The Virginia-based company completed the $790 million acquisition of Scitor earlier last year, and said it contributed about $133 million in revenue during the fourth quarter.
Compared with Scitor’s performance during the same period in 2014, however, the acquired company underperformed by about $6 million due to current-year delays in contract awards and transitions. Like other defense contractors, Science Applications has grappled with lower government spending and contract-award delays.
On a call with analysts and investors Tuesday, Chief Executive Tony Moraco said the U.S. federal government—the company’s primary customer—is operating in a “relatively stable environment and recent federal budget clarity provides opportunity for modest growth of government spending in IT and mission critical areas where SAIC has proven capabilities.”
He said demand for SAIC services is strong and the company’s confidence in revenue growth is bolstered by significant new business awards in 2016, including the $200 million NASA Langley Information Technology Enhanced Services II contract and the $425 million Federal Aviation Administration Controller Training contract.
Mr. Moraco also said the company has completed the final phase of the Scitor integration with the transition of Scitor to SAIC’s enterprise systems.
In the quarter ended January, profit fell 22% due to higher interest expense on incremental term-loan borrowings and acquisition costs.
Overall, the company posted a profit of $28 million, or 60 cents a share, down from $36 million, or 75 cents a share a year earlier. Excluding acquisition and integration costs, earnings were 74 cents, down a penny from a year ago.
Revenue rose 13% to $1.07 billion.
Analysts projected an adjusted 61 cents in per-share earnings on $1.09 billion in revenue.
Net bookings for the quarter were about $0.9 billion. SAIC’s estimated backlog of signed business orders at the end of the quarter was about $7.2 billion, of which $1.9 billion was funded.
On the call, Chief Financial Officer John Hartley said that for 2017, the company continues to expect low single-digit internal revenue growth annually and profitability improvement of 10 basis points to 20 basis points.
SAIC announced last week that Mr. Hartley would leave the company June 30 to return to Southern California with his family. On Tuesday, he said SAIC is in a “strong competitive and financial position.”
“This allows for a good time for me to step down and facilitate a smooth transition to a new CFO,” he said.
