NEW YORK (AP) — Shares of SAIC Inc. rose more than 3 percent on Tuesday as an analyst upgraded the government contractor's rating, saying that the stock price has declined too much and buybacks or asset sales could help it rise.
THE SPARK: Brian Gesuale of Raymond James boosted SAIC, which provides technology for government and industrial customers, to "Outperform" from "Market Perform." He also gave a $14 price target.
Gesuale said in a client note that SAIC's stock feels too cheap, trading at a 13 percent discount to government-information technology firms, even though it has better fundamentals.
THE ANALYSIS: Gesuale says SAIC's management team also seems more receptive to the idea of using the company's balance sheet more. The analyst said that the company issued a dividend earlier this year, a move that he had been supportive of.
Gesuale suggests SAIC now look toward a buyback and selling non-core assets. The analyst says the company's annual buyback should be at least about $500 million but could be as much as $1 billion. Gesuale predicts that a buyback of approximately $1 billion could add about 40 cents per share to full-year earnings, while a sale of non-core assets could add to cash and improve profit margins.
SHARE ACTION: SAIC's stock added 38 cents, or 3.6 percent, to $11 in afternoon trading. The shares have traded in a 52-week range of $10.31 to $17.56.