It's Round 2 for government contracting powerhouse and NYSE-newcomer SAIC (NYSE:SAI) Wednesday afternoon, as it makes its second earnings announcement as a public company. 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? Fifteen analysts follow SAIC today, up one from last quarter. The stock now has one sell rating, in addition to its original 14 holds.

• Revenues. On average, they're looking for 5% revenue growth to $2.07 billion.

• Earnings. Profits are predicted to fall 55% to $0.17 per share.

What management says:
In last quarter's earnings report, CEO Ken Dahlberg termed SAIC's performance "solid ... especially in cash flow generation." He wasn't kidding, either. Despite modest sales growth of just 6% -- half of which was inorganic -- earnings from continuing operations leapt 30%, and cash flow from continuing operations 55%.

Looking forward, Dahlberg saw "a healthy funding environment" generally and made a rather interesting observation that "focus on collaboration to pursue larger opportunities is starting to bear fruit." We'll want to keep an eye on developments in this regard and watch particularly to see whether SAIC's "collaboration" takes the form of lead contractor assignments, which generally bring the highest profit margins, or more subordinate roles.

I have a sneaking suspicion (i.e., fear) that SAIC will more likely be collaborating with larger rivals on the scale of Accenture (NYSE:ACN), IBM (NYSE:IBM), or Lockheed Martin (NYSE:LMT). When it comes to smaller firms, SAIC tends to just buy out rather than partner up.

What management does:
So far, however, growing margins have not proven to be a problem for SAIC. Although the firm's taken a significant hit to its net margins -- thanks in large part to higher income taxes last year -- its rolling gross and operating margins have been rising steadily for nearly a full year.

Margins

6/05

9/05

12/05

3/06

6/06

9/06

Gross

13.0%

13.0%

12.7%

13.0%

13.2%

13.6%

Operating

6.5%

6.1%

6.3%

6.7%

6.8%

7.1%

Net

12.3%

11.9%

11.9%

5.7%

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:
Investors worried by the declining net margins, single-digit revenue growth, and expected fall in absolute net earnings in Wednesday's news may take heart from the words of Fool analyst Alex Dumortier, who recommended SAIC to readers of Motley Fool Inside Value back in February: "The record is clear ... : SAIC has posted 37 years of uninterrupted revenue growth at a 32% annualized rate, without a single year of losses."

Far from a flash-in-the-pan kind of IPO, Alex compares SAIC to similar well-established firms that had IPOs in the past decade: UPS (NYSE:UPS) and Goldman Sachs (NYSE:GS). Both have gone on to beat the market since their IPOs. Not coincidentally, both have something else in common with SAIC, in that they're employee-owned shops. While SAIC may be down temporarily, it's not yet time to count this one out.

(If you'd like to read Alex's full write-up on SAIC, complete with his estimate of the company's true worth, you can. Just claim your free trial subscription to Inside Value and you'll get free access to his February 2007 recommendation.)

Fool contributor Rich Smith does not own shares of any company named above.