NCI (NCIT) Earnings Good; Backlog Excellent

Submitted By Trader Mark
Just an avalanche of earnings to try to get through... catching up. NCI (NCIT) reported nice earnings Wednesday night; organic growth was "ok" but with acquisitions their growth rate was solid. This should be a nice solid, "boring" type of situation.

NCI, Inc. provides information technology services and solutions. It engages in designing, implementing, maintaining, and upgrading secure information technology systems and networks.

We like these sort of names for security of income stream (huge reliance on federal government here, especially Department of Defense) and NCI reported nearly 2.5 years worth of backlog. It is not all "funded" yet but what doesn't the federal government fund in this day and age. Operating margin increases nicely year over year as well and they beat analysts estimates by 2 cents. (slight miss vs analysts on revenue)

For the fourth quarter of 2008, NCI reported record revenues of $101.6 million compared to $88.2 million for the fourth quarter of 2007, with an organic revenue growth rate of approximately 7%. (non organic 15%)
Operating income for the fourth quarter of 2008 was $8.7 million, compared to $6.5 million for the fourth quarter of 2007.
Operating margin of 8.5% for the fourth quarter of 2008 compares with an operating margin of 7.4% for the same period in 2007.
Net income for the fourth quarter was $4.9 million, compared to $3.3 million for the same period in 2007.
Diluted earnings per share for the fourth quarter were $0.36 per share, compared to $0.25 per share for the comparable period in 2007.
The effective tax rate for the fourth quarter of 2008 was 40.0%, which is lower than the prior year fourth quarter rate of 41.7%.

Business Highlights

NCI’s President, Terry Glasgow, stated, “During the fourth quarter we continued to win important new business. In December, NCI was awarded a $173 million ITES-2S task order with the Army National Guard and Air National Guard. This competitively awarded, seven-year task order both continues the important work we are doing as well as allows for an expansion of our work with the National Guard Bureau. New business remains a primary focus for NCI.
In 2008 we were awarded a record $610 million of new contract awards. Once again, we exit the year with a record backlog, a healthy business development pipeline and an exceptional portfolio of GWAC contracts. The new business won in 2008 will propel growth through 2009 and beyond in support of our long term growth objectives.”

Backlog

NCI reported total backlog for the fourth quarter of 2008 of $1,189 million, of which $234 million was funded backlog. This compares to total backlog of $756 million at the end of 2007, including $189 million in funded backlog.

Guidance for 2009

Revenue $440-$455M
EPS $1.44-$1.52

The stock reacted quite well to the news yesterday morning but fell back to support late in the day; I added a bit there. Despite what should be a quiet story, the stock has been quite volatile of late, and if it falls back down to its 200 day moving average we'll look to add some more. I also have my eye on ManTech International (MANT) in a similar vein, whom reports next week.

[Jan 14: Beginning Stake in NCI (NCIT)]

Long NCI in fund; no personal position

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