Analysts and the company attribute its growth to its focus on swelling markets, such as cyber-security and intelligence. The company’s successes there may point to the future of government spending — and the areas more traditional defense contractors will increasingly target.
“Over the last two years, we’ve noted pretty much flawless execution by CACI [in] winning contracts that have seen significant growth,” said Michael S. Lewis, director of equity research at Lazard Capital Markets.
CACI reported profits of $36.4 million ($1.16 per share) in the third quarter of fiscal 2011, up 36.4 percent from $26.7 million (87 cents) in the same period a year earlier. Revenue for the three-month period ended March 31 jumped 16.5 percent to $913.4 million.
The announcement came on the heels of reports of flat revenue from contracting giants Lockheed Martin, General Dynamics and Northrop Grumman.
“Some of these smaller companies are just able to maneuver a little better into the growth areas,” said William Loomis, managing director at Stifel Nicolaus.
For instance, Fairfax-based ICF International, a government services firm with expertise in areas such as energy efficiency, reported earnings of $7.7 million (39 cents per share), up nearly 43 percent from the $5.4 million (28 cents) the company earned in the same period a year earlier.
Among important programs for CACI is an Army intelligence, surveillance and reconnaissance program and an Army intelligence and information warfare contract, both of which allow it to continue to win individual task orders.
The company has also focused on health care as an emerging market, winning a coveted spot on a Department of Veterans Affairs program to consolidate medical records in an electronic database.
“It was sort of an against-all-odds win for us,” said Paul M. Cofoni, CACI’s president and chief executive. “I think we’re sort of breaking out of the pack.”
He said the company has hired about 400 employees in the past nine months — bringing its total head count to 13,700 — and has an equal number of positions to fill. CACI still has more than $6 billion in proposals it has submitted that have not yet been awarded.
Analysts said a potential weakness is the company’s reliance on a few key programs that provide significant revenue, particularly some Army programs that may be scaled back. Moreover, the government contracting space is becoming more competitive, said George A. Price Jr., senior equity research analyst for IT services at BB&T Capital Markets, and it will be “increasingly important to have some sort of differentiator.”
BB&T and its affiliates have relationships with a number of government contractors, including CACI.
Still, CACI seems unconcerned, citing the size of the market and its lengthy experience.
“Next year’s going to be CACI’s 50th year of business, so we know how to do this,” said William M. Fairl, president of CACI’s U.S. operations, in a recent call with investors. “That leads to a very high win rate.”