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DXC Technology Company (DXC - Free Report) recently announced the pricing of a Senior Floating Rate Notes offering worth $650 million. Notes, carrying an interest rate equal to three-month LIBOR plus 0.95% per year, are set to mature in 2021.
Per the company, Merrill Lynch, Pierce, Fenner & Smith Incorporated will lead the underwriting syndicate. Security brokerage and dealership services provider will act as the sole active bookrunner and representative of underwriters.
DXC Technology intends to use the proceeds from the offering for general corporate purposes, which also include the repayment of outstanding indebtedness.
Borrowing costs continue to be low, enabling companies to obtain easy financing. With the U.S. treasuries offering low rates, corporate bonds and borrowings from banks are now witnessing high demand. We believe that these notes will provide financial flexibility to the company and propel long-term growth.
Nonetheless, escalating interest expenses due to increased debt burden may dampen the company’s profitability. As of Jun 30, 2017, DXC has a total long-term debt (excluding current portion) of $6.25 billion, while it paid $76 million as interest expenses during first-quarter fiscal 2018, which was 200% higher than the year-ago quarter tally.
The company’s long-term outstanding debt primarily increased this year. Notably, DXC Technology is a result of the merger between Computer Sciences Corporation (CSC) and Enterprise Services Division of Hewlett Packard Enterprise (HPE - Free Report) , which was closed on Apr 1, 2017.
CSC, prior to the completion of its merger with HPE’s Enterprise Services business, had taken additional debt. This increased DXC Technology’s total long-term liability, thereby increasing its interest cost burden. Any elevation in interest cost will have a negative impact on the company’s bottom-line results.
Additionally, the company noted that the merger has opened up new avenues of growth and will help the combined entity to become a leading player in the IT services domain. Post merger, DXC Technology became the world’s second largest end-to-end IT services providing company after Accenture plc (ACN - Free Report) .
However, we believe that the benefits of this merger will come over the long run, as DXC Technology’s near-term results are likely to bear the impact of the integration of the acquired businesses.
Currently, DXC Technology carries a Zacks Rank #3 (Hold).
DXC Technology stock has gained 21.1% since Apr 1, substantially outperforming the 12% rally of the industry it belongs to.
The stock has long-term expected EPS growth rate of 10%.
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DXC Prices Senior Floating Rate Notes Offerings Worth $650M
DXC Technology Company (DXC - Free Report) recently announced the pricing of a Senior Floating Rate Notes offering worth $650 million. Notes, carrying an interest rate equal to three-month LIBOR plus 0.95% per year, are set to mature in 2021.
Per the company, Merrill Lynch, Pierce, Fenner & Smith Incorporated will lead the underwriting syndicate. Security brokerage and dealership services provider will act as the sole active bookrunner and representative of underwriters.
DXC Technology intends to use the proceeds from the offering for general corporate purposes, which also include the repayment of outstanding indebtedness.
Borrowing costs continue to be low, enabling companies to obtain easy financing. With the U.S. treasuries offering low rates, corporate bonds and borrowings from banks are now witnessing high demand. We believe that these notes will provide financial flexibility to the company and propel long-term growth.
Nonetheless, escalating interest expenses due to increased debt burden may dampen the company’s profitability. As of Jun 30, 2017, DXC has a total long-term debt (excluding current portion) of $6.25 billion, while it paid $76 million as interest expenses during first-quarter fiscal 2018, which was 200% higher than the year-ago quarter tally.
The company’s long-term outstanding debt primarily increased this year. Notably, DXC Technology is a result of the merger between Computer Sciences Corporation (CSC) and Enterprise Services Division of Hewlett Packard Enterprise (HPE - Free Report) , which was closed on Apr 1, 2017.
CSC, prior to the completion of its merger with HPE’s Enterprise Services business, had taken additional debt. This increased DXC Technology’s total long-term liability, thereby increasing its interest cost burden. Any elevation in interest cost will have a negative impact on the company’s bottom-line results.
Additionally, the company noted that the merger has opened up new avenues of growth and will help the combined entity to become a leading player in the IT services domain. Post merger, DXC Technology became the world’s second largest end-to-end IT services providing company after Accenture plc (ACN - Free Report) .
However, we believe that the benefits of this merger will come over the long run, as DXC Technology’s near-term results are likely to bear the impact of the integration of the acquired businesses.
Currently, DXC Technology carries a Zacks Rank #3 (Hold).
DXC Technology stock has gained 21.1% since Apr 1, substantially outperforming the 12% rally of the industry it belongs to.
A better-ranked stock in the same industry space is CSRA Inc. , which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The stock has long-term expected EPS growth rate of 10%.
4 Surprising Tech Stocks to Keep an Eye on
Tech stocks have been a major force behind the market’s record highs, but picking the best ones to buy can be tough. There’s a simple way to invest in the success of the entire sector. Zacks has just released a Special Report revealing one thing tech companies literally cannot function without. More importantly, it reveals 4 top stocks set to skyrocket on increasing demand for these devices. I encourage you to get the report now – before the next wave of innovations really takes off.
See Stocks Now>>