CSRA Inc (NYSE: CSRA) stock rises over 30.3% on Feb 12th, 2018 (as of 10:45AM EST; Source: Google finance) post the General Dynamics acquisition of CSRA. General Dynamics is offering $40.75 in cash, valuing the deal at $9.6B, including debt. The deal is forecasted to be accretive to General Dynamics’ GAAP earnings per share and to free cash flow per share in 2019, while deliver an annual pre-tax cost savings of over 2% of the combined company’s revenue by 2020.
For the third quarter of 2018, the revenue rose 7% on a yoy basis while the Adjusted EBITDA enhanced 7%, and adjusted diluted EPS rose 27%. The group delivered $1.6 billion in bookings for a book-to-bill ratio of 1.3 which is their 12th straight quarter with a book-to-bill ratio of 1.0 or greater. The trailing 12 months book-to-bill ratio reached 1.7.
Over 47% of third-quarter revenue was on fixed-price contracts, while 27% on time and material contracts and 27% on cost-plus contracts. Net EAC adjustments on fixed-price contracts reached $16 million during the quarter which is a rise of $8 million sequentially and $11 million against the prior corresponding period. The adjusted EBITDA margin reached 15.4% which is above the long-term target.
The New business wins reached over $0.5 billion during the quarter while the win rate on new business was 44%, which is above the target rate of 25%. Major new business win was the $238 million enterprise service desk for the Department of Veterans Affairs. CSRA won a 2-year $62 million award to support the U.S. citizenship and immigration services customer engagement center. This deal made CSRA a sole provider of these services to the center, which accepts more than 12 million inquiries for citizenship and immigration information annually.
The group had $12 billion in submits outstanding, including about $8 billion in new work awaiting decision. The group witnessed a solid Proposal activity and forecasts the fourth quarter to be their largest in terms of submitting activity.
The group expects the fiscal year 2018 revenue to be in the range of $5.15 billion and $5.2 billion. Adjusted EBITDA is forecasted to be in the range of $805 million and $825 million, while forecasted adjusted diluted earnings per share in the range of $2 and $2.05 and free cash flow between $330 million and $380 million.