Defense, intelligence, and IT solutions provider CACI International (NYSE:CACI) reported Q4 CY2024 results beating Wall Street’s revenue expectations, with sales up 14.5% year on year to $2.1 billion. The company expects the full year’s revenue to be around $8.55 billion, close to analysts’ estimates. Its non-GAAP profit of $5.95 per share was 14.4% above analysts’ consensus estimates.

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“Our second quarter reflected another exceptional period for CACI. Financial results were strong across the board with double-digit revenue growth, increased profitability, healthy cash flow, and growing backlog. In addition, we closed and integrated the previously announced strategic acquisitions of Azure Summit and Applied Insight", said John Mengucci, CACI President and Chief Executive Officer.

Company Overview

Founded to commercialize SIMSCRIPT, CACI International (NYSE:CACI) offers defense, intelligence, and IT solutions to support national security and government transformation efforts.

Defense Contractors

Defense contractors typically require technical expertise and government clearance. Companies in this sector can also enjoy long-term contracts with government bodies, leading to more predictable revenues. Combined, these factors create high barriers to entry and can lead to limited competition. Lately, geopolitical tensions–whether it be Russia’s invasion of Ukraine or China’s aggression towards Taiwan–highlight the need for defense spending. On the other hand, demand for these products can ebb and flow with defense budgets and even who is president, as different administrations can have vastly different ideas of how to allocate federal funds.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, CACI’s sales grew at a decent 8.5% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. CACI’s annualized revenue growth of 12% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. CACI’s backlog reached $31.8 billion in the latest quarter and averaged 12.8% year-on-year growth over the last two years. Because this number is in line with its revenue growth, we can see the company effectively balanced its new order intake and fulfillment processes.

This quarter, CACI reported year-on-year revenue growth of 14.5%, and its $2.1 billion of revenue exceeded Wall Street’s estimates by 2.9%.

Looking ahead, sell-side analysts expect revenue to grow 9.9% over the next 12 months, a slight deceleration versus the last two years. Despite the slowdown, this projection is commendable and suggests the market is baking in success for its products and services.

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Operating Margin

CACI has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.5%, higher than the broader industrials sector.

Analyzing the trend in its profitability, CACI’s operating margin might have seen some fluctuations but has generally stayed the same over the last five years. Shareholders will want to see CACI grow its margin in the future.

In Q4, CACI generated an operating profit margin of 8.6%, up 1.4 percentage points year on year. This increase was a welcome development and shows it was recently more efficient because its expenses grew slower than its revenue.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

CACI’s EPS grew at a spectacular 15% compounded annual growth rate over the last five years, higher than its 8.5% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t expand.

Diving into CACI’s quality of earnings can give us a better understanding of its performance. A five-year view shows that CACI has repurchased its stock, shrinking its share count by 11.4%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For CACI, its two-year annual EPS growth of 16.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q4, CACI reported EPS at $5.95, up from $4.36 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects CACI’s full-year EPS of $24.23 to grow 6%.

Key Takeaways from CACI’s Q4 Results

We were impressed by how significantly CACI blew past analysts’ backlog and EBITDA expectations this quarter. We were also excited it raised its full-year revenue and EPS guidance. Zooming out, we think this was a good quarter with some key areas of upside. The stock traded up 1.5% to $472 immediately after reporting.

CACI had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.