CSC Revenue Up, EPS Exceeds

Computer Sciences Corporation (CSC - Snapshot Report) reported second quarter 2010 EPS of $1.40, exceeding the Zacks Consensus Estimate of $1.35.

Revenue

The company reported second quarter revenue of $4.0 billion, up 4.7% from $4.2 billion reported in the year-ago quarter. The company witnessed new business bookings and sequentially positive revenues across all three of its business segments.

North American Public Sector (NPS) revenue was $1.62 billion, up 8.5% from the previous year. Managed Services Sector (MSS) revenue was $1.58 billion, down 12.5% from the previous year. Business Solutions and Services (BSS) revenue was $0.86 billion, down 10.7% from the previous year.

New Business

The company won $4.58 billion worth of new business awards in the recently concluded quarter. Of the three lines of business, NPS accounted for $3.23 billion, BSS $0.98 billion and MSS $0.37 billion of new business. For the third quarter of fiscal 2010, the company has secured new business awards of approximately $4.2 billion including the yet to be finalized Zurich Financial Services Group contract.

Operating Results

The company recorded operating margin of 8.44%, up 179 basis points from 6.65% reported in the year-ago quarter. This margin expansion is derived from improved operational performance, benefits from the company’s cost structure improvement program and continued proactive management of expenses.

Computer Sciences reported net income attributable to the company’s shareholders of $216.0 million, down 52.2% from $452.0 million reported in the year ago quarter. The second quarter EPS was $1.40, down from $2.95 reported in the year-ago quarter.

Balance Sheet

Cash increased by about $1.7 billion in the second quarter. The growth can be attributed to improved cash flow. The debt only increased by $467 million and receivables decreased by almost $400 million. Free cash flow improved by $263 million to $429 million in the second quarter.

Guidance

The company reiterated its guidance for fiscal year 2010. Computer Sciences expects new business awards of $17 to $18 billion, revenue of $16.0 to $16.5 billion, operating margin expansion to remain in the range of 25 to 50 basis points over fiscal year 2009 and EPS to remain in the range of $4.80 - $5.00. Free cash flow is expected to remain in the range of 90% to 100% of net income.