On Feb 7, 2014, we upgraded our recommendation on
) to Outperform from Neutral based on its favorable prospects and
improved guidance for fiscal 2014. The company reported
better-than-expected third-quarter results. Moreover, the
company's bookings increased year over year, led by an increase
in contract renewals.
CA INC (CA): Free Stock Analysis Report
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WESTERN DIGITAL (WDC): Free Stock Analysis
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Why the Upgrade?
CA has delivered positive earnings surprise in each of the last
four quarters, with an average beat of 16.78%. Moreover, CA
delivered robust earnings in the third-quarter of fiscal 2014
which not only surpassed the Zacks Consensus Estimate but also
increased 33.7% on a year-over-year basis.
Additionally, management provided an encouraging outlook for
fiscal 2014. Total revenue is expected to decline in the range of
1.0% to 2.0% to $4.52 billion to $4.57 billion (previous
expectation of 2.0% to 3.0% decline). CA expects non-GAAP
earnings per share from continuing operations to increase in the
range of 21.0%-24.0% to $3.05-$3.12 (previously 17.0%-20.0% to
$2.96-$3.03) and ahead of the Zacks Consensus Estimate of $2.95.
Despite the increasing competition from
) and exposure to Europe, CA's cloud expansion and restructuring
initiatives remain on track. A decent renewal rate, modest cash
position and share repurchase activities also appear encouraging.
The company's endeavor to return cash to its investors in the
form of dividend payments also boosts investor confidence.
The strong results and guidance led to positive estimate
revisions for fiscal 2014. All the five estimates for 2014 were
revised upwards over the past 30 days. This led to a significant
increase of 9 cents in the Zacks Consensus Estimate for fiscal
2014, which now stands at $2.95 per share.
CA currently carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Another stock that is worth considering within this sector is
Western Digital Corporation
) carrying a Zacks Rank #2 (Buy).