CACI Upgraded to Strong Buy on Healthy Growth Drivers

On Oct 7, Zacks Investment Research upgraded technical services provider CACI International (CACI) to a Zacks Rank #1 (Strong Buy) from Zacks Rank #2 (Buy) largely on the back of healthy long-term fundamentals. The stock is currently trading at a forward P/E of 13.2x and has long-term earnings growth expectation of 10.0%.

Why the Upgrade?

Strategic acquisitions, new business initiatives and operational excellence are the primary driving factors for CACI. With a focused market-driven strategy, diligent execution of operational plans and strategic capital deployment for inorganic growth, CACI remains focused to reward its shareholders with attractive risk-adjusted returns.

CACI recently procured a $212 million Blanket Purchase Agreement from the U.S. Department of Homeland Security (DHS) to provide Desktop Support Services to its Headquarters, the National Protection and Programs Directorate and the Science and Technology Directorate. The five-year term contract (one-year base period plus four optional ordering periods) signifies DHS’ confidence in CACI’s ability to enhance its agency-wide IT services by improving the efficiency of systems and providing faster helpdesk response time.

Moving forward, CACI intends to drive operational excellence by focusing on its organic and inorganic growth strategies and strengthening its existing customer relationships while building newer ones. The solid fundamentals also find confirmation in positive estimate changes, driving the Zacks Consensus Estimate higher for the current fiscal. The Zacks Consensus Estimates for the ongoing fiscal is currently pegged at $5.36.

For fiscal 2015, CACI expects net income in the range of $125 million to $135 million on revenues within $3.3 billion and $3.6 billion. Earnings per share are expected within $5.10 and $5.51. The company is also on track to fully integrate Six3 Systems with its operations to achieve at least 5% accretion to GAAP earnings per share and 10% on adjusted earnings per share basis.

Other Stocks to Consider

Some other stocks in the industry that also look promising include CGI Group, Inc. (GIB), CSG Systems International Inc. (CSGS) and General Dynamics Corporation (GD), each carrying a Zacks Rank #2 (Buy).

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