Science Applications International (SAIC -1.21%) beat Wall Street earnings expectations, but bookings were short of expectations. Investors are worried about the outlook, sending SAIC shares down 7% as of noon ET.
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Gridlock eats into growth
SAIC is a defense contractor focused on providing IT and other services to military, intelligence, and civil government customers. The company earned $3.63 per share in its fiscal second quarter ending Aug. 1, topping Wall Street's $2.24-per-share estimate, but about $1.10 per share of that beat was due to one-time items, including lower tax expenses and legal benefits.
At $1.77 billion, revenue was down 3% year over year and just below the $1.86 billion consensus estimate. And bookings came in below expectations, causing SAIC to cut both fiscal 2026 and 2027 earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance.
"Slower on-contract growth and continued delays in new business awards and new program ramps are contributing to a more challenging revenue environment than previously forecasted," CEO Toni Townes-Whitley said in a statement. "We are responding purposefully by aligning our cost structure while sustaining key investments to drive long-term value creation."
Is SAIC stock a buy?
SAIC and other defense contractors are currently navigating through the White House's push for greater government efficiency, which in the near term has slowed contract awards and led to concerns about cancellations. But over the long term, that same push could boost the bottom line of these contractors, should lawmakers decide to outsource more government functions.
Townes-Whitley noted that the revised guidance assumes no improvement in transaction flows this year, a stance she called "prudent." That suggests some potential upside from here if business normalizes in the quarters to come.
SAIC is a stable operator with a predictable book of future business, and there is no reason for investors to panic based on these results. But with all the uncertainty surrounding Washington right now, there is no compelling reason to buy in, even after Thursday's declines.
