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Computer Sciences Corporation (CSC - Analyst Report) reported fourth-quarter 2013 earnings per share of $1.27, way ahead of the Zacks Consensus Estimate of 96 cents. The company has been able to control its cost and expand its margins.

Revenues

The company reported fourth-quarter revenues of $3.70 billion, down 7.3% from $3.99 billion year over year. Weak performances of the North American Public (NPS) segment, Managed Services Sector (MSS) and Business Solutions & Services (BSS) resulted in the decline in revenues.

Segment wise, NPS sector’s revenues were $1.31 billion in the quarter or approximately 35.4% of the total company revenue. The segment’s revenues declined 6.8% on a year over year basis. The revenues from the Department of Defense, accounted for 68.0% of the total business, and resulted in a contribution of $884.0 million, which declined 8.0% compared to the year-ago period. Moreover, the NPS segment’s revenues include a $365 million contribution from the civil agencies.

Managed Services Sector'srevenues stood at $1.63 billion, which is around 44.1% of the total revenue generated by the company and is down 4.0% compared to the year ago quarter. However, bookings declined in this sector.

Business Solutions & Services’revenues were $796.0 million in the quarter, representing 21.5% of the total company revenue. Segment revenues declined 12.3% on a year-over-year basis.

Operating Results

The company posted operating profit of $212.0 million, rebounding from an operating loss of $98.0 million reported in the year-ago quarter. The operating profit margin for the quarter was 5.7% compared with a loss margin of 2.5% in the year-ago quarter. The improvement was mainly due to margin expansion across all the business segments backed by proper cost reduction initiative.

Management’s cost savings plans, include areas such as supply chain, workforce optimization, overhead and the contract management focus account.

Net income from continuing operations was $281.0 million or $1.81, compared to a loss of $158.0 million or $1.02 per share in the year ago period. Adjusted net income for the company stood at $197.0 million or $1.27 per share, compared with a loss of $158 million or $1.20 per share in the year-ago quarter.

Balance Sheet & Cash Back To Shareholders

The company exited the quarter with $2.05 billion in cash and cash equivalents, down from $2.20 billion reported in the previous quarter. Long-term debt balance was at $2.5 billion, up from $2.40 billion. Moreover, the company generated $41.0 million of cash from operating activity.

CSC returned $258.0 million to shareholders. While $30 million were in the form of common stock dividends, the remaining $228 million were used for repurchasing 4.7 million shares at an average price of $48.15.

During the fiscal year 2013, CSC returned $428.0 million to shareholders in the form of common stock dividends worth $123.0 million and share repurchases worth $305.0 million. CSC repurchased 6.7 million shares at an average price of $45.47.

Outlook

Computer Sciences Corporation is one of the leading players in the information technology (IT) services industry. The company reported modest fourth-quarter 2013 results, with the bottom line ahead of the Zacks Consensus Estimate but revenues declining on a year-over-year basis. Moreover, the company is giving back cash to its shareholders in the form of dividend and share repurchase.

However, the company is feeling the heat of competition from the likes of BMC Inc. , coupled with a challenging macroeconomic condition in Europe. In addition to this, delayed order renewal process of the Federal government can make things difficult for the company.

Computer Sciences has a Zacks Rank #3 (Hold).

Investors can also consider the below mentioned stocks –

CSGb System Intl Inc. (CSG - Snapshot Report) and Innodata Inc. ((INOD - Snapshot Report) both carrying a Zacks Rank #1 (Strong Buy).

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