What's in the Offing for DXC Technology (DXC) in Q3 Earnings?

DXC Technology DXC is slated to report third-quarter fiscal 2023 results on Feb 1.

For the third quarter of fiscal 2023, the company anticipates revenues between $3.55 billion and $3.58 billion. The Zacks Consensus Estimate for fiscal third-quarter revenues stands at $3.58 billion, indicating a year-over-year decline of 12.5%.

DXC anticipates non-GAAP earnings between 80 cents and 85 cents per share. The consensus mark for earnings is pegged at 84 cents per share, suggesting an 8.7% year-over-year decline.

The company’s earnings outpaced estimates once in the trailing four quarters, matched the same on one occasion and missed in the remaining two, with a negative average surprise of 5.1%.

Let’s see how things are shaping up for this announcement.

DXC Technology Company. Price and EPS Surprise DXC Technology Company. Price and EPS Surprise

DXC Technology Company. price-eps-surprise | DXC Technology Company. Quote

Factors to Consider

The strong U.S. dollar against major currencies and the concluded divestments of certain business units in the past 12 months are also anticipated to have negatively impacted the fiscal third-quarter top line. The company projected unfavorable foreign currency exchange rates to reduce fiscal 2023 sales by $1.2 billion, adjusted EBIT by $130 million and adjusted EBIT margin by 25 basis points.

DXC’s fiscal third-quarter performance is likely to have been negatively impacted by the business operation closure in Russia following the Kremlin force’s invasion of Ukraine. On its fourth-quarter fiscal 2022earnings conference call the company stated that the exit from Russia would reduce its total revenues by approximately $140 million in fiscal 2023.

Moreover, a weak traditional business is likely to have weighed on the to-be-reported quarter's performance. However, sequential revenue stabilization is expected to have continued.

The negative impacts of the aforementioned factors are likely to have been partially offset by DXC’s strength in the digital business and partnerships, which have been helping it expand in the cloud computing space. Increased IT spending is anticipated to have contributed to the top line in the quarter to be reported.

Moreover, margins are anticipated to have benefited from the company’s cost-saving initiatives and reduction in debts, which are likely to have lowered its interest expenses during the quarter. DXC projects the adjusted EBIT margin in the range of 8-8.5% in the fiscal third quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for DXC this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.

Though DXC has an Earnings ESP of +0.17%, it carries a Zacks Rank #4 (Sell) at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, MSCI MSCI, Meta Platforms META and Cisco Systems CSCO have the right combination of elements to post an earnings beat in their upcoming releases.

MSCI carries a Zacks Rank #2 and has an Earnings ESP of +0.76%. The company is scheduled to report fourth-quarter 2022 results on Jan 31. Its earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing the same once, the average surprise being 3.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MSCI’s fourth-quarter earnings stands at $2.71 per share, implying a year-over-year increase of 8%. It is estimated to report revenues of $565.9 million, which suggests growth of 2.9% from the year-ago quarter.

Meta is slated to report fourth-quarter 2022 results on Feb 1. The company has a Zacks Rank #3 and an Earnings ESP of +13.39% at present. META’s earnings beat the Zacks Consensus Estimate once in the trailing four quarters while missing the same on three occasions, the average surprise being -2.6%.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.23 per share, suggesting a decline of 39.2% from the year-ago quarter’s earnings of $3.67. Meta’s quarterly revenues are estimated to decline 7% year over year to $31.3 billion.

Cisco carries a Zacks Rank #3 and has an Earnings ESP of +1.66%. The company is slated to report second-quarter fiscal 2023 results on Feb 15. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 2.1%.

The Zacks Consensus Estimate for CSCO’s fiscal second-quarter earnings is pegged at 86 per share, indicating a year-over-year increase of 2.8%. The consensus mark for revenues stands at $13.43 billion, suggesting a year-over-year increase of 5.6%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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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 Nasdaq, Inc.

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