President-elect Barack Obama's in the White House, and to hear people talk, it's a new day for the defense industry. How will this affect megadefense contractor SAIC
What analysts say:
- Buy, sell, or waffle? 15 analysts are feeling optimistic about SAIC, giving the stock eight buy ratings and seven holds.
- Revenues. On average, these analysts expect to see SAIC grow revenues 10% to $2.6 billion.
- Earnings. Profits are predicted to rise 11.5% to $0.29 per share.
What management says:
SAIC updated investors on its present status and future plans in an investor presentation in October. It's a pretty weighty document, but boils down to this: Management expects to earn $9.7 billion to $10 billion this year based on as much as 9% organic growth. It also anticipates earning operating margins between 7.7% and 7.8% on that revenue.
What management does:
Which poses investors a dilemma. SAIC says things are improving, but so far this year, we've seen little movement. Sure, SAIC is still earning better operating margins than rivals like CACI
4/07 |
7/07 |
10/07 |
1/08 |
4/08 |
7/08 |
|
---|---|---|---|---|---|---|
Gross |
13.3% |
13.3% |
13.6% |
13.8% |
13.9% |
13.8% |
Operating |
7.0% |
7.0% |
7.3% |
7.5% |
7.6% |
7.5% |
Net |
4.5% |
4.7% |
4.6% |
4.7% |
4.7% |
4.3% |
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.
One Fool says:
Regardless of whether SAIC pulls a rabbit out of its hat tomorrow, though, it behooves a long-term-thinking Fool to keep in mind what SAIC plans farther down the road. Here, too, SAIC told us a few things in October. For example, SAIC aims to improve margins at least in part by exiting "non-core commodity/low margin businesses." (So, don't be alarmed if revenues don't grow sprightly. This could be intentional, as SAIC trades out of low-margin work for more profitable endeavors.)
Among these new ventures, expect to see SAIC move eagerly into the four fields it believes have top prospects for growth: Energy management -- such as the help it's giving BP
Now you know where to look for improvements. Just a few words to the Foolish.
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