Mediocre Performance from CSC - Analyst Blog

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Computer Sciences Corporation ( CSC ) reported fourth quarter 2012 loss per share of $1.02, way below the Zacks Consensus EPS Estimate of 20 cents.

Revenue

The company reported revenues of $4.11 billion in the quarter, down 2.1% year over year.  The year-over-year decline in revenue was primarily attributed to the company's NPS segment. The company's commercial business, principally BSS, grew at the rate of 1.3% in constant currency, while it was roughly flat on a GAAP basis.

During the quarter, the company registered NPS revenue of $1.40 billion, declining 6.6% from the fourth quarter last year),MSS revenue was $1.71 billion, declining 2.3% from the year ago quarter and BSS revenue was $1.03 billion, improving 5.1% from the year ago quarter.

New Business

The company secured total new business awards of $6.3 billion across its three lines of businesses. North American Public Sector (NPS) contributed $1.2 billion, Managed Services Sector (MSS) delivered $4.0 billion, and Business Solutions & Services (BSS) closed $1.1 billion worth new business.

For the fiscal year 2012, new business awards for the company was $19.3 billion, which increased by 30.0% compared to the previous year. This is constituted of MSS of $9.5, whereas NPS $6.0 billion, and BSS of $3.8 billion.

Operating Results

The company posted loss from continuing operation of $71.0 million, compared to a profit of $338.0 million reported in the year ago quarter. The operating loss margin for the quarter was (2.04%), deteriorating considerably from the operating profit margin of 8.04% in the year-ago quarter. The margin was negatively impacted by higher cost of services and a significant goodwill impairment charge during the quarter.

Computer Sciences reported net loss, attributable to the company's shareholders, of $158.0 million compared with a profit of $171.0 million in the year-ago quarter. Reported loss per share of $1.02 was much wider than the EPS of $1.01 in the year-ago quarter.

Balance Sheet

The company exited the quarter with $1,093.0 million in cash and cash equivalents, up from $898.0 million reported in the previous quarter. CSC had a total debt balance of $2.74 billion, up from $2.73 billion in the previous quarter.

Guidance

The Company is still evaluating the impact of the turnaround initiatives and is expected to issue annual guidance later for fiscal year 2013, most probably during the next earnings call.

Recommendation

Computer Sciences is one of the leading players in the information technology (IT) services industry. CSC reported mediocre fourth quarter 2012 result, with the bottomline missing the Zacks consensus estimate and the company registering a loss per share. The company displayed a mediocre operating performance, whereas the new business awards improved meaningfully.

Intense competition in the IT and cloud computing space from both small and big players such as Accenture plc ( ACN ) and Hewlett-Packard Company ( HPQ), its European exposure and strained federal budgets have prompted our bearish outlook on the stock.

Currently, CSC holds a Zacks #5 Rank (implying a short-term Strong Sell rating).


 
ACCENTURE PLC (ACN): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ACN , CSC , HPQ , IT

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