Last quarter marked a milestone of sorts for government contractor and NYSE newcomer SAIC (NYSE:SAI). For the first time in its short life as a publicly traded company, SAIC missed Wall Street's consensus earnings estimate. This week, investors will be hoping to see a different kind of first at SAIC -- the first time it bounced back from an earnings miss. SAIC's fiscal 2008 second-quarter numbers are due out Thursday afternoon.

What analysts say:

  • Buy, sell, or waffle? Fourteen analysts follow SAIC, down one from last quarter. The stock now receives one buy rating, one sell, and 12 holds.
  • Revenue. On average, the analysts expect to see 6% revenue growth to $2.17 billion.
  • Earnings. Profits are predicted to come in at $0.20 per share.

What management says:
We've all heard about the rash of personal data thefts at banks such as Bank of America (NYSE:BAC), data processors like ChoicePoint (NYSE:CPS), brokers such as Ameritrade (NYSE:AMTD), and retailers like TJX (NYSE:TJX). Why, the butterfingered incidents have even reached the hallowed halls of our own government agencies. So I guess it was only a matter of time before major government contractors began reporting goofs of their own.

Case in point: SAIC confessed in July that "information ... stored on a single, SAIC-owned, non-secure server at a small SAIC location, and in some cases ... transmitted over the Internet in an unencrypted form ... was placed at risk for potential compromise." In the context of other firms having actual knowledge of miscreants accessing their data, and in some cases using it in actual identity theft schemes, SAIC's warning of "risk for potential compromise" sounds pretty tame. Still, the company has hired Marsh & McLennan (NYSE:MMC) subsidiary Kroll to help patch its security, and it would take at least $7 million to $9 million in charges in its second fiscal quarter to fix the breach.

What management does:
That won't do any good for the trend of declining gross, operating, and net margins at SAIC. But to put things in perspective, the midpoint of the range SAIC posited, $8 million, represents just one-tenth of one percent of the firm's cost of goods sold over the last 12 months. For a company this big, the financial cost of the breach isn't a tragedy, folks. It's a rounding error.





























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:
So basically, it's steady as she goes at SAIC. At last report, management was still reiterating its previous guidance for this fiscal year. We're still looking for $8.7 billion to $9 billion in revenue, $370 million or more in free cash flow, and anywhere from $0.83 to $0.88 per share in per-share earnings under GAAP. With shares outstanding expected to approximate 430 million this year, that works out to somewhere between $357 million and $378 million in GAAP earnings. As a result, we can conclude that the firm's GAAP numbers are firmly supported by the generation of actual cash profits. In fact, it seems the company will likely generate even more profit in cash than it gets to report as income under the accounting standards. You gotta love that.

Want to learn more about SAIC? Get the word straight from the horse's mouth (no offense intended) -- the Fool's own Alex Dumortier recently interviewed Titan (now L-3 (NYSE:LLL)) alum and current SAIC CFO Mark Sopp. You can read the complete interview for free when you sign up for a free trial subscription to Motley Fool Inside Value.

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Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.