Defense contractor SAIC (NYSE:SAI) reports its first earnings as a public company Tuesday afternoon. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? How many analysts follow SAIC? Fourteen. A better question is "why?" All of them have hold ratings on the stock. Way to play vanilla, guys.
  • Revenues. On average, they're looking for $2.11 billion in revenue.
  • Earnings. Profits are predicted to come in at $0.23 per share.

What management says:
SAIC management hasn't said much of interest (at least, not that it's filed with the SEC) since IPO-ing back in October. Whilst waiting to hear something of import from the execs, therefore, you might entertain yourself with some thoughts from my Foolish colleague Tom Taulli, who argues that SAIC is a company built to last.

What management does:
SAIC's margin trends suggest recent improvements at this 37-year-old business. Rolling gross margins have risen in each of the last two quarters. More impressive considering the added costs attendant upon an IPO, the rolling operating margins are rising as well. As for the steep drop in the net, pay it no mind. SAIC recorded $530 million in profits from discontinued operations in the April 2005 quarter, which inflated its rolling net in that and the subsequent three quarters. Since then, they've stabilized at just less than 6%.

Margins %

4/05

7/05

10/05

1/06

4/06

7/06

Gross

12.7

13.0

12.8

12.7

13.0

13.2

Op.

6.6

6.9

6.2

6.3

6.7

6.9

Net

12.4

12.3

11.9

11.9

5.7

5.7

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Lacking much of a publicly reported history to work from, I'm going to refrain from trying to express any deep thoughts on SAIC for the time being. But my initial impression of the company is that, even though it's pricier now than it was on IPO day, the stock looks attractive today. It sports a trailing P/E ratio lower than many of its peers. Its revenues, while not growing rapidly, are at least growing (up about 5.6% year over year during the last six-month period). Meanwhile, cost of services provided and selling, general, and administrative costs are all being kept below 5% year over year. The longer SAIC can keep that up, the more its margins -- already twice the industry average -- will expand, allowing profits to grow faster than the relatively tame sales growth might suggest.

Speaking of which, given that SAIC was likely spending significant sums on legal and accounting due diligence while preparing for its IPO over the last six months, I suspect that a reduction in operating costs in future quarters is likely -- and improvement in profit margins as well.

Competitors:

  • Accenture (NYSE:ACN)
  • BearingPoint (NYSE:BE)
  • CACI (NYSE:CAI)
  • IBM (NYSE:IBM)
  • Lockheed Martin (NYSE:LMT)
  • Northrop Grumman (NYSE:NOC)

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Fool contributorRich Smithdoes not own shares of any company named above. The Fool has a disclosure policy.