On Jan. 14, I presented Barron's Investor Circle members my stock idea, CACI International, a provider of defense technologies. Nine days after publication -- Jan. 23 -- the stock was up 8.3%. So far, that is its 2026 high. CACI International has since declined 25%, despite booming business. Investors should combat their fears and stick with the stock.

Despite reporting two consecutively strong quarters, CACI was sold indiscriminately during February's AI-induced software retreat. "Software and knowledge/consulting names were hit particularly hard" early this year, says Richard Stroud, investment director for London-based TrinityBridge. "Moats once perceived as entrenched had been rocked."

Still, the company reported fiscal 2026 third quarter results on April 22 that should have served as an anti-stock-decline weapons system: 8.5% year over year revenue growth and a 18% jump in free cash flow that beat its own guidance, and a 16.6% increase in earnings per share that is still respectable.

Awarded contracts in the third quarter included 26% new business for the company for a total of $2.2 billion, including a five-year, $306 million software order for the Department of Defense, a $231 million satellite order for the U.S. Special Operations Command, and a $287 million contract for the U.S. Army's Integrated Personnel and Pay System. The company completed its $2.6 billion all-cash acquisition of ARKA Group, expanding its product portfolio to include space-based sensors and laser warning systems. Backlog increased 6.4% to $33.4 billion. CACI even contributed its optical communications expertise to the Artemis II mission.

There's more. The company raised its revenue guidance 1.6% to an average of $9.6 billion from $9.4 billion. Expectations on adjusted diluted earnings per share are now $28.04, down 1.9% from a previously guided $28.59 -- though this is still ahead of September's $27.58 forecast.

"Defense stocks have sold off since the Iran war started, in part to fund rotation into AI Industrial Stocks," says Jonathan Evans, director analyst at Barrow Hanley Global Investors. "There have also been concerns about a possible blue wave and the defense budget peaking."

However, an analysis of CACI's stock price since President Jimmy Carter's last day in office in 1981 counters a common misconception about the strength of defense stocks under Republicans versus Democrats. There have been four Republican administrations since Ronald Reagan took the oath of office on Jan. 20, 1981 and three Democratic. CACI's performance was superior under Democratic administrations, contributing 781% to the stock's 1,433% increase in price since then, compared with the 652% return under Republican presidents.

Lastly, defense stocks in general shouldn't be on the defensive at this moment: Jamie Dimon, CEO of JPMorgan Chase, has committed $10 billion of the bank's capital to invest in defense-related companies.

It's a shame that for all its tech prowess CACI can't devise a high-tech sentiment-nonsense detector to eliminate market noise and conflicting signals. "To us, we're a free cash flow growth company, period. That's how we manage the company," John Mengucci, President and CEO of CACI, noted at the company's June 10 presentation at Wells Fargo's Industrials and Materials Conference.

No special detector should be needed to interpret this signal. If Mengucci's plain talk can't be received by investors' antennae or Bluetooth, they'd better check their connectivity.

CACI's compelling metrics should combat skeptics.

   -- Join us for the next live Q&A: Hear from our stock pickers and technical 
      analyst as we discuss the latest market developments -- and take your 
      questions. Register here 
 
   -- Share your questions and thoughts in the "Conversation" section below to 
      engage directly with the author and our community 
 
   -- Receive alerts about more content from this author by clicking "Follow" 
      next to the author byline at top 

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 01, 2026 03:25 ET (07:25 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.