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Science Applications Secures $57M Contract From U.S. Navy

Zacks Equity Research

Science Applications International Corp. SAIC recently announced that it has been awarded a $57 million worth Seaport-e task order with a one year base period and four more optional years, by the U.S. Navy.

Per the contract, Science Applications will provide engineering services to the Polymers and Undersea Sensors Branch at the Naval Surface Warfare Center (“NSWC”), Crane Division.

Moreover, the company will offer R&D services, rapid prototype development and test and evaluation, among other services.

The services are based on the Product Support Center services model that Science Applications co-developed with NSWC Crane, with which it has a 30-year partnership. The model includes life cycle support to systems and platforms with solution analysis, system engineering and integration, and sustainment.

This task order announcement follows another Seaport-e task order worth $37 million, which was awarded to Science Applications a few days ago to provide its mission support services to the NSWC, Panama City.

Contract Wins Boost Growth

Science Applications is perennially benefiting from back-to-back contract wins. The government’s inclination to adopt technologies is a positive for the company. In the third quarter of fiscal 2019 it recorded $10.4 billion total backlog.

Furthermore, having the government as a big client lends stability to the business and moderates fluctuation in revenues. Although the government generally has a lengthy approval process, the project earns money for a number of years after it is approved.

Moreover, government contracts improve the visibility of future revenue streams.  Science Applications has been doing very well with a record level of awards, which reflects its disciplined business development actions, consistent operational excellence and high customer satisfaction.

The company continues to execute its strategy of winning high-value contracts, delivering excellence to customers and deploying capital for growth. Its robust business model is expected to help it grow further.

Prospects Bright Despite Competition

Competition from CACI International CACI in the federal marketplace remains steady. During its last reported quarter, awards bagged by CACI included a five-year, $73 million contract with the Naval Surface Warfare Center. Its acquisition of the Systems Engineering and Acquisition Support Services Business Unit led the company to secure this award.

Nonetheless, Science Application’s recent buyout of government IT service provider Engility is expected to boost its growth in key markets and enhance its competitive position. This is because Engility provides skilled personnel to the U.S. departments of defense, homeland security and justice. Notably, Engility was the buyout target of five big companies in the past, including CACI, which was apparently the runner up to Science Applications. This makes us optimistic about the company’s growth prospects.

Science Applications International Corporation Revenue (TTM)

Science Applications International Corporation Revenue (TTM) | Science Applications International Corporation Quote

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Zacks Rank & Other Key Picks

Science Applications currently carries a Zacks Rank #1 (Strong Buy).

A couple of other top-ranked stocks in the broader Computer and Technology sector are Fortinet, Inc. FTNT and Synopsys, Inc. SNPS, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Fortinet and Synopsys is projected to be 16.75% and 10%, respectively.

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