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CACI Tempers Outlook

Earnings beat estimates, but the contractor warns an uncertain defense budget may hurt results.
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CACI International

(CAI) - Get CAI International, Inc. Report

posted 16% growth in fiscal second-quarter earnings amid increased intelligence work, but the government contractor cautioned its full-year earnings results may be hurt by uncertainty over Defense Department spending.

For the quarter ended Dec. 31, CACI earned $22.3 million, or 72 cents a share, on revenue of $419.5 million. Excluding stock option costs, earnings were 75 cents a share. The earnings beat analysts' mean estimate of 70 cents a share, but revenue fell short of expectations of $423 million, according to Thomson First Call data.

A year earlier, CACI earned $19.1 million, or 63 cents a share, on revenue of $389.7 million.

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Looking ahead, CACI said its guidance for the second half of its fiscal year reflects lower revenue and income from ongoing business due to government spending delays.

"During the quarter, the abnormal delay and the unpredictability of when the FY06 DoD appropriations would be signed into law resulted in a constrained spending environment and uncertainty on the part of the Company's defense customers concerning the full-funding of their programs for FY06," CACI said. "These factors have resulted in lower contract funding orders in the quarter, delays in forecasted contract awards, and the slower initiation of new work during the government's fiscal year."

The company also noted that a higher percentage of its revenue in the second half will come from subcontractors, yielding lower margins.

CACI expects third-quarter earnings of 69 cents to 72 cents a share, including 4 cents of stock-option expense, and revenue of $465 million to $475 million. Wall Street projects revenue of $462 million and earnings of 77 cents a share.

For the full year, CACI now expects earnings of $2.73 to $2.83 a share, including 24 cents in options costs. The company's prior forecast, given in October, called for earnings of $2.84 to $2.98 a share. According to First Call, which includes the options costs in its estimates, analysts target earnings of $2.90 a share. CACI also raised its full-year revenue projection to $1.81 billion to $1.84 billion from its earlier forecast of $1.75 billion to $1.83 billion.