CACI’s stock rises after acquisitions

CACI International Inc.’s stock has climbed in the last month after recent acquisitions expanded the Arlington information-technology company’s contracts and boosted its financial forecast.

CACI yesterday said it won a five-year, $45 million contract with the Social Security Administration through its latest subsidiary, CMS Information Services Inc., a Vienna information-technology firm. The company bought the firm last month for an undisclosed price.

CACI’s subsidiary will provide technical support to the government agency’s Baltimore headquarters and its satellite office in Falls Church.

The contract award follows another acquisition of the defense and intelligence unit of American Management Systems Inc., a Fairfax information-technology company. AMS sold the rest of its operations to Montreal-based CGI Group Inc.

CACI paid $415 million in cash for the unit, which is expected to expand the company’s presence in the defense, intelligence and homeland security government markets, said Chief Financial Officer Steve Waechter.

The contract and recent acquisitions “are setting CACI up for continued double-digit growth that is in line with what they had forecasted,” said Joseph Vafi, equity-research managing director at Jefferies & Co. Inc., a New York investment bank. Mr. Vafi does not own CACI shares and Jefferies has no business with the company.

But Timothy Quillin, a research analyst for Little Rock, Ark., investment bank Stephens Inc., is taking a cautious approach with the acquisitions, particularly with American Management Systems.

“Our belief is the company paid a premium price for the unit, which could end up being a strategic fit for CACI. But we want to wait for the evidence,” said Mr. Quillin, who rated the stock as “equal-weight” or equal to other information technologies in the government sector.

The AMS acquisition, estimated to close in May pending government approvals, will add $275 million to $285 million to CACI’s fiscal 2005 revenues and 14 to 17 cents in earnings per diluted share, Mr. Waechter said.

CACI’s sales rose 29 percent in its second fiscal quarter ended Dec. 31 to $263 million from $204 million last year. Income also surged 35 percent for its second fiscal quarter ended Dec. 31 to $14.3 million (48 cents per diluted share) from $10.6 million (36 cents) a year earlier. Diluted earnings per share include the value of convertible warrants and stock options.

The company expects to make $1.06 billion to $1.08 billion in its fiscal year, which ends in June. CACI expects that it will reach $1.4 billion in 2004 revenue, up from previous estimates of $1.06 billion to $1.08 billion. The company revised its guidance after buying the defense and intelligence unit of American Management Systems Inc.

Mr. Quillin said he also is concerned about a potential slowdown in government technology spending. “It’s a looming issue that isn’t specific to CACI, but could impact contract opportunities,” said Mr. Quillin, who does not own any company shares. Stephens also has no banking relationship with CACI.

Mr. Vafi, who rated the stock a “buy,” forecasted earnings to reach $1.95 per diluted share for the year. He said CACI’s stock should meet his $50 price target through a steady increase without much volatile movement on the New York Stock Exchange.

CACI’s stock closed yesterday at $45.96, up 2 percent from a week earlier at $45.16. The stock peaked at $52 in December but has stayed in the $40 range for the last three months.