We reiterate our Neutral recommendation on
Computer Science Corporation
) following mixed second-quarter results. Although CSC's earnings
per share beat the Zacks Consensus Estimate, revenues missed the
consensus mark. Moreover, a volatile economic scenario and
company's European exposure keep us on the sidelines.
Currently, CSC has a Zacks Rank #3 (Hold)
Why the Reiteration?
Computer Science' earnings increased 34.8% in the second-quarter
of fiscal 2014 to 93 cents per share from the year-ago quarter,
driven by margin expansion. Revenues on the other hand declined
9.7% from the year-ago quarter to $3.19 billion, primarily due to
weak performances across all its business segments.
Computer Sciences is adopting a cloud-based model and re-engaging
the salesforce in a more efficient way. This, along with
restructuring actions is positively supporting margin expansion.
Moreover, share buybacks and dividends are other positives for
However, competition from its peers like
) and uncertainty on federal spending are the major headwinds for
Management provided cautious outlook for fiscal 2014. Revenues
are expected to decline marginally on a year-over-year basis.
Computer Sciences' fiscal 2014 earnings is expected in the range
of $3.50-$3.70 per share, which is significantly up from fiscal
This weak revenue guidance resulted in negative estimate
revisions for the current quarter. Most of the estimates were
revised downwards over the last 60 days. The Zacks Consensus
Estimate declined 6.6% (6 cents) to 85 cents for the upcoming
However, for the full year, the Zacks Consensus Estimate jumped
couple of cents to $3.69. Given the mixed signals, we reiterated
our Neutral recommendation.
Better ranked stocks in the technology sector are
Marvell Technology Group Ltd.
) both carrying a Zacks Rank #2 (Buy).
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