SAIC Reports Good First Quarter

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SAIC announced their earnings for the first quarter of 2009 and following in the steps of most major defense contractors had a good one. The company saw revenues up twelve percent when compared to the same quarter last year. This was up to $2.65 billion with an operating income of over $200 million.

The company is concerned that some of the changes that the Obama Administration has announced and already carried out to the future defense budget may affect them. This includes the decision to stop work on the current Future Combat Systems (FCS) contract. The company is hopeful that they will play a role in whatever new system is developed which will make up for the loss of revenue.

The company is rather unique among the top ten defense contractors in that it primarily provides technical and analytical support rather then making large systems or providing logistical support. In fact in their press release on the results the company highlights that they won major support contracts such as the Armed Forces Health Longitudinal Technology Application/Composite Health Care System (AHLTA/CHCS) Support. This contract will provide “engineering, logistics and sustainment support to AHLTA/CHCS to ensure the quality care of 9.4 million beneficiaries at more than 135 Military Treatment Facilities worldwide”.

Even with the end of the FCS work the company has a significant funded backlog of almost $6 billion. This allowed it to predict steady guidance on its 2010 earnings. As with any of these changes that are being made with the defense budget unless there is a significant decrease in the total funding ending a program just means that there may be more for another. This allows an opportunity for another company to win it, or even the losing one to get work.

It will remain to be seen whether the future trend in funding is down as some people think. It maybe that next year’s reports may not be so good.

For more on earnings see these posts:

Is It Time To Turn Bearish On Defense Stocks?

EADS Mirrors Boeing In Earnings Report

General Dynamics Continues Trend Of Strong Earnings

Tags: SAIC, Earnings, Financial Accounting, Aerospace & Defense, Finance, Manufacturing, Matthew Potter

Matthew Potter works supporting US Army aviation programs. He holds degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, Defense Procurement News.

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