On Tuesday, three months after DynCorp (NYSE:DCP) dropped the ball in the third quarter of 2008, I asked whether the Falls Church, Va., defense contractor would be able to "pick itself up, dust itself off, and get back on the outperformance horse." Well, the answer is no.

Unfortunately, by pretty much any measure you choose, DynCorp failed to deliver last quarter. Sales that were expected to rise more than 6% managed barely half that growth. Profits that were supposed (according to analysts) to sacrifice only a penny in comparison to last year's Q3 instead fell by nearly half.

Tempest in a proverbial teacup?
Despite growing sales a bit, operating margins declined to 4% in Q4, and the best DynCorp could do with that was earn $0.17 per share. Thanks to the lackluster result, DynCorp's 5.6% operating margin (for the year) lags almost every government contractor you can name, be it SRA International (NYSE:SRX), SAIC (NYSE:SAI), or CACI (NYSE:CAI). At this point, DynCorp beats only Halliburton (NYSE:HAL) spinoff KBR (NYSE:KBR).

That said, the problem with operating margins might be only temporary. As DynCorp explained in its earnings release, two one-time items bore most of the blame for the disappointing operating profits. First, the company is finally moving ahead on the military translation contract it won from (and subsequently subcontracted to) L-3 Communications (NYSE:LLL). But while it began incurring costs on the contract in Q4, revenue has not yet begun to flow, meaning DynCorp couldn't help but lose money on it last quarter.

DynCorp's other "issue" concerns litigation -- specifically, a judgment it lost in a lawsuit filed by "a former subcontractor." Combined with other litigation costs, that subtracted $12.5 million from operating profit -- or about half of the quarter's decline. But DynCorp is appealing the court's ruling, so there's at least a chance that money will come back to it in time.

The future
With its biggest issues being apparent one-time items, you might expect DynCorp to bounce back soon. And in fact, management predicts it will earn about $1.30 per share on roughly $2.9 billion in revenue in fiscal 2009 -- a 55% increase over 2008 performance. Granted, analysts are expecting more than that, and their disappointment with guidance may help to explain the stock's drop today. But to this Fool, 55% growth sounds pretty good.

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