) reported second-quarter 2014 adjusted earnings (excluding
amortization, other gains and software development costs
capitalized but including stock-based compensation) of 83 cents
per share, which comprehensively beat the Zacks Consensus
Estimate of 68 cents. On a year-over-year basis, earnings
improved from 56 cents.
Although CA's revenues of $1.14 billion decreased 1.04% from
the year-ago quarter, it marginally beat the Zacks Consensus
Estimate of $1.11 billion. The year-over-year decline was
primarily due to 1.9% decrease in revenues from Subscription and
maintenance revenues (82.9% of total revenue) which more than
offset the 2.11 % increase in revenues from Professional Services
(8.5% of total revenue) and 4.3% improvement in revenues from
Software and other Fees (5.6% of total revenue).
Moreover, on a segment basis, revenues from CA's Mainframe
Solutions segment and Services segment increased 0.8% and 2.11%,
respectively, but failed to offset the 4.3% decline in revenues
from the Enterprise Solutions segment.
The company's mainframe revenues were positively impacted by
higher sales of new products and mainframe capacity while
Services revenues increased due to higher professional services
engagements. However, Enterprise solution segment revenues were
impacted by lower-than-expected sales of new products.
The company witnessed total bookings of $877 million, which
increased 5% from the year-ago period. Revenues from North
America remained flat while International revenues were down 3%
from the year-ago quarter.
CA's adjusted gross margins (including stock-based
compensation) declined 49 basis points (bps) on a year-over-year
basis to 85.9% primarily due to a lower revenue base. However, a
638 bp drop in operating expenses as a percentage of revenues on
a year-over-year basis boosted CA's operating margins.
CA's adjusted operating margins (excluding amortization, other
gains and software development costs capitalized but including
stock-based compensation) improved by 588 bps on a year-over-year
basis to 39.1%. The company reported adjusted net income
(excluding amortization, other gains and software development
costs capitalized but including stock-based compensation) of $375
million or 83 cents which improved from $258.8 million or 56
cents reported in the year-ago quarter.
Balance Sheet, Cash Flow & Share
Cash, cash equivalents and investments came in at $2.80
billion, up from $2.46 billion, reported in the previous quarter.
The company's total outstanding debt (long-term debt including
current portion) was $1.77 billion. CA generated $87 million in
cash from operating activities.
Moreover, during the reported quarter, CA repurchased around 5
million shares for $145 million and paid $114 million in
For fiscal 2014, the company expects total revenue to decline
in the range of 3% to 2.0%. CA expects growth in non-GAAP
earnings per share from continuing operations to decline in the
range of 17.0%-20.0% to $2.96-$3.03.
Although CA reported better-than-expected second-quarter
results, the year-over-year comparison for the top line was down.
Most of CA's revenue-generating segments were adversely affected
during the reported quarter, with the exception of services
revenues which increased modestly. Moreover, the company
witnessed an increase in license wins and moderate growth in
However, we are positive about CA's increased cloud exposure.
Decent renewal rate, modest cash position and share repurchase
also appear encouraging.
On the other hand, increasing competition from
International Business Machines
) and exposure to Europe remains the near-term headwind.
CA currently has a Zacks Rank #3 (Hold).
CA INC (CA): Free Stock Analysis Report
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