We expect information technology services provider
Computer Sciences Inc
) to beat expectations when it reports fourth quarter 2013
results on May 15.
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Why a Likely Positive Surprise?
Our proven model shows that Computer Sciences is likely to beat
earnings because it has the right combination of two key
Positive Zacks ESP:
Earnings Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
), which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, is +3.09%. This is
very meaningful and a leading indicator of a likely positive
earnings surprise for shares.
Zacks Rank #3 (Hold):
Note that stocks with Zacks Ranks of #1, #2 and #3 have a
significantly higher chance of beating earnings. The sell rated
stocks (#4 and #5) should never be considered going into an
The combination of Computer Sciences' Zacks Rank #3 and +3.09%
ESP makes us very confident in looking for a positive earnings
beat on May 15.
What is Driving the Better Than Expected
Management expects to drive $500-$600 million cost reduction in
2013 and $1.0-$1.2 billion by 2014. During the last quarter,
management asserted that the company has achieved cost
optimization well ahead of its target.
Computer Sciences also stated that the divestiture of its Credit
Solutions business to Equifax Inc. and certain other non-core
businesses has generated funds, which will be used to return
shareholder value through a share repurchase program and
contribution to pension fund.
Banking on the cost reduction plan, which is on track, Computer
Sciences now expects 2013 earnings per share from
continuing operations in the range of $2.50-$2.70 (up from
previously expected range of $2.30-$2.50).
Computer Sciences has delivered positive surprises in the last
three quarters. Given the earnings growth potential, we believe
the company is likely to post a surprise in its fourth quarter
Other Stocks to Consider:
Investors can also consider the below mentioned stocks, which
have the potential to beat earnings estimate:
) has an Earnings ESP of +3.03% and a Zacks Rank #2 (Buy).
International Game Technology
) has an Earnings ESP of +3.23% and a Zacks Rank #2 (Buy).
) has an Earnings ESP of +2.38% and a Zacks Rank #3 (Hold).