Earnings season is just about over, with almost all companies already having reported their quarterly results. But there are still a few companies left to report, and SAIC (NYSE: SAI) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
SAIC plays a vital role in the way that the U.S. and foreign governments gather intelligence and respond to threats, providing technical services like engineering, research, and systems integration for the Defense Department and the Department of Homeland Security, among others. Let's take an early look at what's been happening with SAIC over the past quarter and what we're likely to see in its quarterly report on Tuesday.
Stats on SAIC
|
Analyst EPS Estimate |
$0.52 |
|
Year-Ago EPS |
($0.49) |
|
Revenue Estimate |
$2.71 billion |
|
Change From Year-Ago Revenue |
8.7% |
|
Earnings Beats in Past 4 Quarters |
1 |
Source: Yahoo! Finance.
Will SAIC keep investors safe this quarter?
Over the past few months, analysts have given mixed signals about SAIC. They've boosted their earnings projections for the just-ended quarter by a penny per share, but they've reduced their fiscal 2014 calls by $0.02 per share. The share price, though, has been unequivocally positive, rising 12% since mid-December.
At first, it may sound surprising to hear that a company so intimately linked to the U.S. government would be doing well. With sequestration having taken effect, defense-spending cuts have hurt companies throughout the industry. Even companies with major contracts are feeling the pinch, as Boeing (BA 1.10%) has had to face the potential for cuts to its KC-46 tanker project. Lockheed Martin (LMT 1.63%) has received substantial criticism recently about its F-35 fighter contract and the cost overruns that have plagued it over the years.
But SAIC has worked its way into essential niche areas. In particular, cybersecurity has become a hot area in the defense and intelligence community, especially in light of accusations that Chinese hackers are trying to penetrate government and private-sector networks to gain valuable information. With SAIC working with Intel's (INTC +1.05%) McAfee division to develop stronger firewalls to withstand cloud-based attacks, major defense contractors are looking to incorporate cybersecurity solutions into their broader contracts, which could give SAIC more subcontract work in the future.
Last month, SAIC announced plans to split into two companies. One will deal with national security, health care, and engineering and will be named Leidos. The other will continue to carry the SAIC name and concentrate on technical services and enterprise information technology.
In its quarterly report, watch for SAIC to give more commentary about the effect of sequestration on its business, as well as the strategy for both parts of the business going forward. That should help you decide whether to invest now or wait for the eventual split to choose one part of SAIC's business for your portfolio.
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