Defense, intelligence, and IT solutions provider CACI International (NYSE:CACI) reported results ahead of analysts' expectations in Q2 CY2024, with revenue up 19.7% year on year to $2.04 billion. The company's full-year revenue guidance of $8 billion at the midpoint also came in 1.1% above analysts' estimates. It made a non-GAAP profit of $6.61 per share, improving from its profit of $5.30 per share in the same quarter last year.
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CACI (CACI) Q2 CY2024 Highlights:
- Revenue: $2.04 billion vs analyst estimates of $1.93 billion (5.5% beat)
- EPS (non-GAAP): $6.61 vs analyst estimates of $5.93 (11.4% beat)
- Management's revenue guidance for the upcoming financial year 2025 is $8 billion at the midpoint, beating analyst estimates by 1.1% and implying 4.4% growth (vs 14.3% in FY2024)
- EPS (non-GAAP) guidance for the upcoming financial year 2025 is $22.88 at the midpoint , missing analyst estimates by 1.8%
- Gross Margin (GAAP): 9.7%, down from 34.9% in the same quarter last year
- EBITDA Margin: 11.5%, in line with the same quarter last year
- Free Cash Flow of $134.6 million, down 27.9% from the previous quarter
- Backlog: $32 billion at quarter end, up 24% year on year
- Market Capitalization: $9.96 billion
“CACI’s exceptional fiscal year 2024 financial performance is the result of the relentless execution of our strategy. Our results were strong across the board, including achieving organic growth in the mid-teens, and delivering on our margin and cash flow expectations,” said John Mengucci, CACI President and Chief Executive Officer.
Founded to commercialize SIMSCRIPT, CACI International (NYSE:CACI) offers defense, intelligence, and IT solutions to support national security and government transformation efforts.
Defense Contractors
Defense contractors typically require technical expertise and government clearance. Companies in this sector can also enjoy long-term contracts with government bodies, leading to more predictable revenues. Combined, these factors create high barriers to entry and can lead to limited competition. Lately, geopolitical tensions–whether it be Russia’s invasion of Ukraine or China’s aggression towards Taiwan–highlight the need for defense spending. On the other hand, demand for these products can ebb and flow with defense budgets and even who is president, as different administrations can have vastly different ideas of how to allocate federal funds.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Luckily, CACI's sales grew at a decent 9% compounded annual growth rate over the last five years. This shows it was successful in expanding, a useful starting point for our analysis. 
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. CACI's annualized revenue growth of 11.1% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
CACI also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. CACI's backlog reached $32 billion in the latest quarter and averaged 9.8% year-on-year growth over the last two years. Because this number is in line with its revenue growth, we can see the company effectively balanced its new order intake and fulfillment processes. 
This quarter, CACI reported robust year-on-year revenue growth of 19.7%, and its $2.04 billion of revenue exceeded Wall Street's estimates by 5.5%. Looking ahead, Wall Street expects sales to grow 3.6% over the next 12 months, a deceleration from this quarter.
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Operating Margin
CACI has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 8.4%, higher than the broader industrials sector.
Looking at the trend in its profitability, CACI's annual operating margin might have seen some fluctuations but has remained more or less the same over the last five years. Shareholders will want to see CACI grow its margin in the future.
In Q2, CACI generated an operating profit margin of 9.7%, in line with the same quarter last year. This indicates the company's overall cost structure has been relatively stable.
EPS
Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
CACI's EPS grew at a remarkable 14.4% compounded annual growth rate over the last five years, higher than its 9% annualized revenue growth. However, this alone doesn't tell us much about its day-to-day operations because its operating margin didn't expand.
We can take a deeper look into CACI's earnings quality to better understand the drivers of its performance. A five-year view shows that CACI has repurchased its stock, shrinking its share count by 11.6%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings. 
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For CACI, its two-year annual EPS growth of 8.8% was lower than its five-year trend. We hope its growth can accelerate in the future.
In Q2, CACI reported EPS at $6.61, up from $5.30 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects CACI to grow its earnings. Analysts are projecting its EPS of $21.07 in the last year to climb by 10.5% to $23.28.
Key Takeaways from CACI's Q2 Results
We were impressed by how significantly CACI blew past analysts' backlog expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. On the other hand, its full-year EPS forecast was underwhelming. Zooming out, we think this wasn't a perfect quarter, but it was certainly a solid one. The stock traded up 2% to $455 immediately following the results.
CACI may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.