CA Inc.
(
CA
) reported second quarter 2013 adjusted earnings per share (EPS)
of 56 cents, a penny ahead of the Zacks Consensus Estimate.
Revenue
Total revenue in the reported quarter came in at $1.15 billion,
down 4.0% from $1.20 billion in the year-ago quarter and below
the Zacks Consensus Estimate of $1.17 billion. When adjusted for
currency, quarter's revenue remained flat year over year. The
decline was due to longer sales cycle, lower product sales and
overall macro uncertainty.
Region wise, 63.4% of the company's revenue in the second quarter
came from North America while the remaining 36.6% came from
International operations.
Revenue Segments
As per revenue segments, Mainframe Solutions revenue was $619.0
million, down 5.5% year over year. Enterprise Solutions revenue
was $438.0 million, down 2.4% year over year. Services revenue
was down 1.0% year over year to $95.0 million.
Bookings
The company witnessed total bookings of $837.0 million in the
second quarter, down 13.9% year over year, primarily due to a
decrease in renewals and lower product sales.
North America bookings were $500.0 million, down 25.0% year over
year while international bookings grew 9.0% year over year to
$337.0 million.
Operating Results
Reported operating income was $337.0 million, up 1.2% from $333.0
million in the year-ago quarter, aided by better cost management
by the company.
Net income on a GAAP basis was 48 cents per share versus 47 cents
per share in the year-ago quarter. Excluding special items, such
as software amortization, intangible amortization, restructuring
and other and hedging gains/losses, but including the stock-based
compensation expenses, non-GAAP net income in the second quarter
stood at 56 cents per share versus 50 cents in the prior-year
quarter.
Balance Sheet and Cash Flow
CA generated cash flow from continuing operations of $89.0
million compared with $183.0 million in the year-ago quarter. The
decline was mainly due to lower billings growth and collection.
Cash, cash equivalents and marketable securities were $2.2
billion versus $2.5 billion in the previous quarter.
Guidance
Considering the ongoing economic turmoil and lower bookings, CA
reduced its forecasts for fiscal 2013. However, it would continue
to introduce new products and solutions, expand partner networks
and focus on cost reduction.
For fiscal year 2013, the company expects revenue in the range of
$4.58-$4.67 billion reflecting a decline of 3.0%-1.0% in constant
currency (previously up 1.0% to 2.0%). GAAP diluted earnings per
share from continuing operations growth in constant currency in a
range of 8.0% to 12.0% (previously up 12.0% to 14.0%). This
growth in constant currency translates to GAAP EPS range of $1.99
to $2.07.
Non-GAAP diluted earnings per share from continuing operations
are expected to grow in the 6.0% to 10.0% range (previously 10.0%
to 12.0%). This translates to reported non-GAAP diluted earnings
per share of $2.36 to $2.44. Cash flow from continuing operations
is expected in the range of $1.38 billion to $1.44 billion
(previously $1.54 billion to $1.57 billion).
Our Take
CA Inc. posted modest second quarter results marginally ahead of
the Zacks Consensus Estimate on bottom line, but missing the same
on top line. Revenue fell year over year due to lack of new
business deals and lesser number of renewals. Bookings were lower
reflecting lackluster demand for CA's products and solutions. The
company also reduced its fiscal 2013 outlook to reflect the
ongoing macro uncertainties.
But we are hopeful on CA's broadened cloud exposure for which the
company received an accolade from an IT research firm, IDC. The
firm elected CA as the market leader in cloud systems management
market. Hence, we expect CA to capitalize on the growing demand
for cloud in the long term. We are also encouraged by the
company's continuous share buyback and dividend payout.
However, we are concerned about the intense competition in the
software & cloud computing space from big players such as
IBM Corp.
(
IBM
) and
Hewlett-Packard Company
(
HPQ
) as well as high debt balance, reduction in tech spending and
European exposure.
Currently, CA has a Zacks #3 Rank, which translates into
short-term Hold rating.
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