CA Inc.
(
CA
) is scheduled to announce its second quarter 2013 results after
the close of trading on October 25, 2012. We do not see much
variation in analysts' estimates at this point.
First Quarter Recap
The company reported decent first quarter 2013 adjusted
earnings per share (EPS) of 60 cents, ahead of the Zacks
Consensus Estimate of 56 cents. Total revenue in the reported
quarter came in at $1.145 billion, down 1.5% from $1.163 billion
in the year-ago quarter.
The company witnessed total bookings of $553 million in the
first quarter, down 36.0% year over year, primarily due to a
decrease in renewals. The company had previously stated that it
expects fiscal year 2013 renewal portfolio to decline in the
single digit range annually, with the first quarter being the low
point.
Reported GAAP net income was 51 cents per share versus 48
cents per share in the year-ago quarter.
Fiscal 2013 Guidance
For fiscal 2013, the company expects revenue growth in the
range of 1.0% to 2.0%. GAAP diluted earnings per share from
continuing operations in constant currency are expected to rise
in the range of 12.0% to 14.0%.
Non-GAAP diluted earnings per share from continuing operations
are expected to grow in the 10.0% to 12.0% range. This translates
to non-GAAP diluted earnings per share of $2.45 to $2.50 and cash
flow from continuing operations of $1.54 billion to $1.57
billion.
Agreement of Analysts
Out of the seven analysts providing estimates for the second
quarter, none revised their estimates over the last 30 days.
Also, none revised their estimate over the last 30 days for the
December quarter. Similarly, no revision was witnessed for fiscal
2013 and 2014.
Some analysts are optimistic about sales based on the focus of
the new management towards developing regions. Moreover, the
company is also making considerable effort to enhance its product
portfolio by offering multiple versions of the same product, so
that the customers can enjoy the most recent offerings.
Moreover, analysts are also considerably optimistic about the
fact that the company offers the 'SaaS first' policy for all new
development, so that it can overtake business from other SaaS
based vendors like ServiceNow.
The lack of estimate revisions reflects the fact that there
were no major catalysts during the quarter. Consequently, the
analysts are sticking to the estimates projected post first
quarter earnings.
Magnitude of Estimate Revisions
The magnitude of revision is also minimal post the company's
first quarter results. Overall, estimates for the upcoming
quarter have remained constant over a period of 30 days, but
dipped by 2 cents to 55 cents over the past 90 days. The
estimates of 2013 remained constant over the last 30 and 90 days
to $2.34. For fiscal 2014, estimates remained constant over the
last 30 days, but declined by 2 cents to $2.53 over the last 90
days.
Recommendation
CA Inc. posted decent first quarter results exceeding the
earnings estimates, although revenue declined on a year-over-year
basis. This apart, the company witnessed decline in bookings.
However, the product demand trend was moderate in the reported
quarter.
Looking into the company's enhanced product portfolio, growing
customer base and revival in the macroeconomic scenario, we
believe that the company has provided conservative guidance for
fiscal 2013.
Intense competition in the software and cloud computing space
from big players such as
IBM
(
IBM
) and
Hewlett-Packard
(
HPQ
) is a challenge. In addition, its high debt balance and European
exposure may pose as challenges going forward. Reduction in tech
spending by government agencies and European exposure are the
other headwinds going forward.
The company currently has a Zacks #3 Rank, implying a
short-term Hold rating.
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