What Happened?
Shares of government IT services provider Science Applications International Corporation (NASDAQ: SAIC) fell 13% in the morning session after the company announced weak first quarter 2025 (fiscal 2026) results which missed analysts' EPS estimates.
The underwhelming result was due to sluggish revenue growth, which rose just 2% year on year, driven largely by volume increases in existing and new contracts, but weighed down by the completion of older contracts.
Looking ahead, the company reaffirmed its full-year guidance for adjusted EPS and EBITDA, but both fell short of Wall Street estimates. Management pointed to strong bookings with a 1.3 book-to-bill ratio and high-profile wins like the U.S. Army contract, but those longer-term prospects likely didn't sway investors focused on profitability. Overall, it was a weak quarter.
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What The Market Is Telling Us
SAIC’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. Moves this big are rare for SAIC and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 11.7% on the news that the company reported impressive fourth quarter 2024 (fiscal 2025) results, which blew past analysts' sales and earnings estimates. Organic sales grew 5.8% compared to the previous year by increased contract volume, which helped push adjusted EBITDA up 39% compared to the prior year.
Margins expanded significantly, with operating income as a percentage of revenue rising to 7.5% from 4.5% in the prior year, thanks to improved contract profitability and lower expenses. This was a key driver behind the earnings beat.
Looking ahead, full-year guidance for EBITDA and EPS were both ahead, suggesting the improved growth momentum is expected to continue. Overall, we think this was a strong quarter with top and bottom-line improvements.
SAIC is down 9.7% since the beginning of the year, and at $101.31 per share, it is trading 34.3% below its 52-week high of $154.10 from November 2024. Investors who bought $1,000 worth of SAIC’s shares 5 years ago would now be looking at an investment worth $1,115.
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