On Thursday, Science Applications International Corp. (NASDAQ: SAIC) received a revised price target from Jefferies, now set at $140.00, increased from the previous $135.00, while the Hold rating on the stock was maintained. The adjustment follows the company's recent announcement of its second fiscal quarter results, which included a modest increase in revenue by 2% and a slight decline in EBITDA by 2%.
The company's performance exceeded expectations, leading to an upward revision of its fiscal year 2025 forecasts, with revenue growth now expected at 3% and EBITDA projected to grow by 4%. The updated financial outlook is largely attributed to improvements in items below the line. However, there remains some caution regarding the anticipated growth trajectory, which suggests a significant increase from 1% organic growth in the first half to mid-single digits in the fourth quarter.
The firm's estimation for Science Applications' organic growth for the current year has been adjusted to 2%, a decrease from the previously expected 3%. Furthermore, the company's compound annual growth rate (CAGR) through fiscal year 2027 is estimated at 2%, which is considerably lower than the 7% growth rate of its peers. This disparity in growth rates is cited as the reason for Science Applications' shares trading at approximately a 30% discount to the average forward price-to-earnings (P/E) ratio of its peers.
This price target revision reflects the company's solid financial performance in the second fiscal quarter and its revised growth projections. It also takes into account the comparative analysis of the company's growth rate against that of its industry peers. Science Applications International Corp. continues to trade on the NASDAQ with its updated Hold rating and new price target of $140.00.
In other recent news, Science Applications International Corp. (SAIC) reported a steady performance in its second quarter earnings call. The technology integration firm showcased a 2% year-over-year organic revenue growth, an adjusted EBITDA of $170 million, and a robust free cash flow of $241 million. SAIC's CEO, Toni Townes-Whitley, highlighted the company's commitment to enhancing its business development processes, projecting the fruits of this strategy to materialize within the next two to three quarters.
The company aims for a book-to-bill ratio of 1.2x by the first half of fiscal year 2026 and a 5% organic revenue growth by the end of the same fiscal year. SAIC also reaffirmed its fiscal year guidance for revenue, adjusted EBITDA, and free cash flow. As part of its growth strategy, the company is focusing on the Civilian market and Enterprise and Mission IT.
Despite acknowledging risks related to contract protests and the impact of elections on their book-to-bill targets, executives expressed confidence in their strategy to drive sustainable growth and deliver value for shareholders. SAIC is also improving bid submissions, expecting to exceed $22 billion in bids for the year. These recent developments indicate SAIC's strategic transition towards targeted growth areas and improved bidding processes.
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