Why SAIC Stock Is Up Today

Defense IT specialist Science Applications International (NASDAQ: SAIC) delivered better-than-expected earnings, easing concerns about pullbacks as part of the government's efficiency push. Investors applauded the results, sending SAIC shares up 13% as of 10 a.m. ET.

Strong margin performance

SAIC is one of several defense contractors focused on providing technical services to various military and civil government agencies. The company earned $2.57 per share in its fiscal fourth quarter ending Jan. 31 on revenue of $1.83 billion, topping Wall Street's $2.09 per share on revenue of $1.81 billion consensus estimate.

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Revenue was up 6% year over year, but net income jumped by 151%, fueled by a 250-basis point improvement in operating margin. The company also raised its guidance for the new fiscal year by $0.20 per share on the high and low end to between $9.10 and $9.30 per share.

After the quarter closed, SAIC received a $1.8 billion award. CEO Toni Townes-Whitley said that "this important win, along with a backlog of submitted bids valued at approximately $20 billion, reflect the momentum we are building inside the company."

Is SAIC stock a buy?

The quarter was strong, but perhaps the most important news came during the post-earnings call, when management said they have seen only "nominal" program cancellations from the newly formed Department of Government Efficiency (DOGE). Investors are nervous about the impact DOGE will have on these contractors.

There are still some reasons for concern. SAIC's new awards and funded orders relative to sales were weak, in part due to customer uncertainty. But SAIC, if nothing else, provided evidence that the business is not falling apart in the new operating environment. For long term-focused investors who can handle the potential for uncertainty up ahead, SAIC deserves a place on the watch list.

Should you invest $1,000 in Science Applications International right now?

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.