On Mar 13, 2014, we issued an updated research report on
Computer Sciences Corp.
) after its mixed performance in the third quarter.
Although the company's revenues declined year over year,
better cost management though business realignment strategy had
resulted in a year-over-year increase in its bottom line.
Fiscal year-to-date, the company has reduced cost by
approximately $415 million and management now expects the savings
to be at the higher end of the guided range of $500-$550 million
for the full year.
Moreover, the company is reinvesting these savings in
strategic areas to propel growth. Year-to-date, Computer Sciences
had $195 million and plans to reinvest approximately $300 to $325
million. Given the fact that revenue growth initiatives may take
some time to gain momentum, these cost-cutting actions will go a
long way toward earnings per share growth.
It is noteworthy that the company is focusing on cyber
business, cloud computing market and Big Data business. Computer
Sciences' cyber business gets its primary contribution from the
federal government and, to an extent, the commercial sector.
Additionally, the company's traction in the cloud and
partnerships with HCL,
) are expected to drive growth, going forward.
Moreover, the company's continuous share buybacks and dividend
payments are expected to support earnings and instill investors'
However, the market is becoming competitive with companies
like CACI International Inc. and Accenture making their presence
felt. Delay in the government's order renewal process and
constricted federal spending are the near-term headwinds for the
Despite sales team reorganization, the revenues remain
subdued. Full effect of the sales team restructuring could take
more time than expected which is a near-term concern.
Currently, Computer Sciences sports a Zacks Rank #2 (Buy).
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