CA Beats 1Q Earnings, Revs Down - Analyst Blog

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CA Inc. ( CA ) reported first-quarter 2014 adjusted earnings per share of 77 cents, ahead of the Zacks Consensus Estimate of 70 cents.

Revenues

Total revenue reported in the first quarter of 2014 was $1.13 billion, down 1.5% from $1.15 billion reported in the year-ago quarter. When adjusted for currency, revenues declined 1.0% year over year. This was due to a decline in Mainframe Solutions and the Enterprise solutions business.

Revenue Segments

The company's Mainframe revenues and Enterprise Solutions revenues declined by 1.4% and 11.0%, respectively, but the Services revenues grew 7.7%. Although the company witnesses some good business opportunity in the Enterprise segment, but the transaction sizes were much smaller.

Bookings

The company witnessed total bookings of $824.0 million, up 49.0% on a reported basis. North American bookings were $423.0 million, up 29.8% year over year on a reported basis. International bookings for the company were $401.0 million up 76.7% from the year-ago quarter. The company witnessed an increase in the weighted average duration of subscription and maintenance bookings, which stood at 3.10 years, up from 2.79 years in the year-ago quarter.

Moreover, the company executed a total of nine license agreements having an incremental contract value in excess of $10.0 million each, resulting in an aggregate total contract value of $323 million.

Operating Results

Total operating expenses for the quarter $900.0 million up 17.8% compared to the year ago period, mainly due to product development cost and other gains. Moreover, the pre tax margin for the reported quarter was 19.2% down from 32.3% in the year-ago-quarter.  

On a GAAP basis, net income was $335.0 million or 73 cents per share versus $240.0 million or 51 cents per share in the year-ago quarter. Excluding special items, such as software amortization, intangible amortization, restructuring and other and hedging gains/losses, but including stock-based compensation expenses, non-GAAP earnings in the first quarter stood at 77 cents per share versus 60 cents in the prior-year quarter.

Balance Sheet, Cash Flow & Share Repurchase

CA generated $11.0 million cash from operating activities, down from $570 million, in the previous quarter. Cash, cash equivalents and investments came in at $2.46 billion, down from $2.78 billion, reported in the previous quarter. The company's total outstanding debt was $1.29 billion, flat sequentially.

Moreover, during the reported quarter, CA repurchased around 2 million shares for $53.0 million.

Guidance

For fiscal 2014, the company expects total revenue to decline in the range of 4.0% to 2.0% to reach a level of $4.39 billion to $4.38 billion. CA expects growth in non-GAAP earnings per share from continuing operations to decline in the range of 16.0%-20.0%, amounting to $960.0 billion to $1.04 billion. Cash flow from operations is expected in the range of $960 million to $1.04 billion. While the non-GAAP earnings per share of $2.90 to $3.00.

Outlook

CA Inc. reported mixed first-quarter results, with bottom-line exceeding the Zacks Consensus Estimate while revenues declining on a year-over-year basis. Most of CA's revenue-generating segments were adversely affected during the reported quarter, with the exception of services revenues which increased modestly. Apart from this, cash position declined sequentially. The company's guidance for fiscal 2014 appears to be modest.

However, we are positive about CA Inc's increased cloud exposure. Decent renewal rate, modest cash position and share repurchase also appear encouraging. This apart, the bookings growth for the company is also robust, supported by both North American and International bookings. Moreover, the company is also witnessed an increase in license win. On the other hand, increasing competition and exposure to Europe remain concerns.

CA currently has a Zacks Rank #1 (Strong Buy).

Investors can also consider other stocks in the technology industry that are currently performing well such as Aspen Tech Inc. ( AZPN ), SanDisk Corp ( SNDK ) and Western Digital Corp. ( WDC ). While Aspen and SanDisk carry a Zacks Rank #1 (Strong Buy), Western Digital holds a Zacks Rank #2 (Buy).



ASPEN TECH INC (AZPN): Free Stock Analysis Report

CA INC (CA): Free Stock Analysis Report

SANDISK CORP (SNDK): Free Stock Analysis Report

WESTERN DIGITAL (WDC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AZPN , CA , SNDK , WDC

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