SAIC stock pitch for Spring 2016.
Defense Sector Overview
- Consists of companies who primarily get revenue from government defense contracts
- Sub-sector of Aerospace and Defense Industry
- Revenue growth has declined since passage of 2011 Budget Control Act
- Stagnating growth has also been attributed to program cancellations and contract award delays
- Implementation of Least Technically Acceptable Price (LTAP) decreased revenues on defense contracts
- Global tensions rising due to ISIS, Russia-Ukraine, and other factors
- Increased military spending in Russia, China, and Middle East Countries
- Expected to begin new growth cycle starting in 2016
- Move away from LTAP contracts in favor of best value
- Increasing M&A activity
- Divestment from inefficient revenue streams
SAIC Overview
- Provider of technology integration specializing in engineering, intelligence, and enterprise IT services to the US. government
- Split from parent company (Now Leidos) in 2013 after 46 year history to separate defense focus from consulting
- Completed restructuring expenses from split in 2015
- 15,000 Employees
- Acquired Scitor in May 2015 to gain access into intelligence industry
- Scitor- 1,500 employees and S60oM in revenue
- Financed $790M Scitor acquisition through $670M in loans and $12oM cash on hand
- Expected to payoff acquisition by 2021
- Decrease in revenue due to timing in contract awards
- Increase in operating income clue to low restructuring expense
- Bookings-Estimated Future Revenue from contracts gained during period
- Backlog- Estimated Future Revenue under negotiated contracts total
Global Tension
- Terrorist attacks and threats have increased public concern over security
- Paris Attacks
- San Bernardino
- Russia and Ukraine Conflicts
- North Korea concerns
SAIC Spring 2016 Stock Pitch
