On Monday, BofA Securities adjusted its price target for CACI International (NYSE:CACI), a company specializing in national security services, raising it to $555 from the previous $535, while reiterating a Buy rating on the stock.
The firm's decision reflects a positive view of CACI's strategic capital deployment, particularly in relation to mergers and acquisitions (M&A).
"As we have highlighted, national security services names typically do not participate in M&A for the realization of cost synergies but rather to gain exposure to the 3 C™s “ capabilities, customers, and contracts," the analysts said.
This approach is seen as beneficial for gaining a stronger foothold in key areas of national defense. Specifically, recent acquisitions by CACI are expected to provide closer customer relationships and a complementary presence within important defense commands and programs, including NAVWAR, NAVAIR, and various Army ISR initiatives.
The increased price target is based on a revised relative EV/EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortization) multiple of 1.05 times for the defense primes on calendar year 2025 estimates, up from the previous multiple of 1.0. This adjustment translates to a 15.5 times EV/EBITDA ratio, up from 15.0 times. According to BofA Securities, the transaction's accretive nature justifies this higher valuation multiple.
Despite the raised price target, BofA Securities stated that it will keep its model and adjusted earnings per share (EPS) estimates for CACI unchanged until the transaction is finalized. The firm emphasizes its confidence in the stock by reiterating its Buy rating, signaling its continued endorsement of CACI's market position and growth strategy.
ICACI International is set to acquire Azure Summit Technology in a $1.275 billion all-cash transaction, which is expected to enhance its software capabilities in the defense technology sector. This acquisition is part of CACI International's strategic moves, which also include the planned acquisition of another undisclosed company. TD Cowen and Baird have maintained a Buy rating on CACI shares, with TD Cowen setting a price target of $480, and Baird to $544.
CACI's recent financial performance has been strong, with a 20% increase in Q4 revenue and a 14% rise for the full fiscal year, surpassing its own guidance. The company secured a record $14 billion in contract awards, and its backlog rose to $32 billion, marking a 22% year-on-year increase.
For fiscal year 2025, CACI projects a revenue growth of 6% to 8.5%, with an expected 11% increase in free cash flow per share. The company's revenue is estimated to be between $7.9 billion and $8.1 billion, with adjusted net income projected between $505 million and $525 million.
InvestingPro Insights
As CACI International (NYSE:CACI) continues to garner attention following BofA Securities' updated price target, insights from InvestingPro provide a deeper understanding of the company's financial health and market performance. CACI's market capitalization stands at $10.96 billion, indicating its significant presence in the national security sector. The company's P/E ratio, which is currently at 26.2, suggests that the stock is trading at a premium relative to near-term earnings growth, aligning with BofA Securities' optimism about CACI's strategic acquisitions.
InvestingPro data also shows a robust revenue growth of 14.28% over the last twelve months as of Q4 2024, highlighting the company's expanding operations. Additionally, CACI has demonstrated a solid gross profit margin of 32.8%, reflecting efficient cost management and a strong competitive edge in its industry. Despite not paying dividends, CACI's stock has experienced a significant price uptick of 27.79% over the last six months, underscoring the market's positive reception to its growth strategies.
InvestingPro Tips further reveal that analysts expect CACI to be profitable this year, with the company having been profitable over the last twelve months. These insights, combined with the analyst's prediction of CACI's potential for closer customer relationships and a stronger presence in defense programs, suggest that investors may find value in considering the company's recent performance and market position. For those seeking additional analysis, there are 10 more InvestingPro Tips available for CACI at https://www.investing.com/pro/CACI, providing a comprehensive look at the company's prospects.
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