Yahoo Finance CSRA Stock Gains on Navy Contract Win Worth $39 Million
Shares of CSRA Inc. CSRA gained more than 1.5% on Mar 23, after the company announced a contract win from the Department of Navy worth $39 million. The original contract dates back to 2009 and the renewal will enable the company to continue its support to effectively manage Navy Public Affairs.
CSRA is the largest pure play government IT service provider. Almost 90% of the company’s revenues come from sales to the U.S. federal government either as a prime contractor or subcontractor. The renewal reflects growing preference for the company’s IT services by federal departments.
Frequent Contract Wins Boost Book-to-Bill
We note that CSRA’s deep domain knowledge and expertise in next-generation IT services is helping it to win new contracts on a frequent basis. At the end of third-quarter fiscal 2017, the backlog of signed business orders was $15.8 billion, of which $2.7 billion was funded.
CSRA Inc. Revenue (TTM)
CSRA Inc. Revenue (TTM) | CSRA Inc. Quote
Total backlog increased 3% from the year-ago quarter. Bookings totaled $1.9 billion in the reported quarter, representing a book-to-bill ratio of 1.5 times. Moreover, 73% of bookings in the quarter were for new business, while the win rate on new business was 46%, well above management’s target of 25%.
So far in this fiscal, the company has won $3.1 billion in new business, ahead of its target run-rate of $4 billion each year.
Inconsistent Revenues Hurting Growth
Despite winning frequent contracts, CSRA’s revenue growth has been inconsistent since it started trading as a standalone company. Since Nov 30, 2015, we note that shares have declined 6.8% as compared with the Zacks IT Services industry’s increase of 10.8%.
The projections are also not optimistic for the upcoming quarters. CSRA expects industry book-to-bills for the fourth quarter to be a bit dampened by the ongoing transition in the Trump administration.
Moreover, slow ramping of the Office of Personnel Management (OPM) background investigations contract and the large Army C4ISR program is anticipated to impact the quarter. These programs will take some time to generate meaningful revenues (especially the OPM contract) which will impact top-line growth in the near term.
Strategic Partnerships Key Catalyst
CSRA’s collaborations with strategic partners like Amazon Web Services (AWS), Oracle ORCL, Cisco CSCO, Microsoft MSFT, salesforce, SAP and ServiceNow is a key catalyst in our view.
The partnerships not only help the company in jointly developing differentiating solutions (like the application with Oracle Exadata that helped in winning the HIGLAS contract) but also bid for complex contracts like Greenway. We believe that these partnerships will help the company win new contracts more regularly.
Currently, CSRA carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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