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DXC Technology's (DXC) Q2 Earnings Top, Revenues Miss Estimates
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DXC Technology’s (DXC - Free Report) reported second-quarter fiscal 2022 non-GAAP earnings of 90 cents per share, beating the Zacks Consensus Estimate of 84 cents. The bottom line also surged approximately 41% from the prior-year quarter’s earnings of 64 cents per share, mainly on expanding margins and lower interest expenses and tax rate, which more than offset the negative impact of reduced revenues.
Revenues of $4.03 billion missed the consensus mark of $4.12 billion and declined 11.6% year over year. The unfavorable year-over-year comparison might be due to the spin-off and sale of its U.S. State and Local Health and Human Services business to Veritas in October 2020, as well as the sale of the healthcare software business to Dedalus Group in April 2021. Also, a negative impact of $59 million from unfavorable exchange rate hurt quarterly revenue growth.
Quarter in Detail
Segment wise, revenues from Global Business Services (“GBS”) slid 16.5% on a year-over-year basis to $1.87 billion. The HHS business’ divestiture last October affected this segment’s top line. On an organic basis, the division’s revenues increased 3.4%, year over year, primarily aided by the strong performance of Analytics and Engineering, and Applications offerings.
DXC Technology Company. Price, Consensus and EPS Surprise
Global Infrastructure Services (“GIS”) revenues came in at $2.15 billion during the fiscal second quarter, down 6.8% year over year, reflecting declines in IT Outsourcing, Business Process Servicesand Modern Workplace. However, growth in Cloud and Security was a positive.
The adjusted EBIT margin was 8.6%, expanding 240 basis points (bps) year over year and 60 bps, sequentially. Margins were primarily supported by the company’s ongoing cost-optimization initiatives under which it is focusing on four cost levers — contractor conversion, scaling its GIDCs,real estate and automation through Platform X.
Balance Sheet and Other Financial Metrics
The company exited the fiscal second quarter with $2.70 billion in cash and cash equivalents compared with the $2.46 billion witnessed in the previous quarter. The long-term debt balance (net of current maturities) decreased to $4.36 billion as of Jun 30 from $4.12 billion as of Jun 30, 2021.
During the reported quarter, the company recorded operating and adjusted free cash outflows of $563 million and $404 million, respectively. In the first-half of fiscal 2022, the company generated operating and adjusted free cash outflows of $534 million and $100 million, respectively.
Outlook
For the third quarter of fiscal 2022, the company anticipates revenues to lie between $4.08 billion and $4.13 billion. The adjusted EBIT margin is expected in the range of 8.6-8.9%. DXC projects adjusted earnings per share in the band of 88-93 cents.
For fiscal 2022,the company lowered its revenue guidance range to $16.4-$16.6 billion from $16.6-$16.8 billion. However, it raised the adjusted earnings outlook to $3.52-$3.72 per share from $3.45-$3.65 per share.
The long-term earnings growth rate for Applied Materials, Advanced Micro Devices and Perficient is currently pegged at 19.4%, 44.6% and 18%, respectively.
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DXC Technology's (DXC) Q2 Earnings Top, Revenues Miss Estimates
DXC Technology’s (DXC - Free Report) reported second-quarter fiscal 2022 non-GAAP earnings of 90 cents per share, beating the Zacks Consensus Estimate of 84 cents. The bottom line also surged approximately 41% from the prior-year quarter’s earnings of 64 cents per share, mainly on expanding margins and lower interest expenses and tax rate, which more than offset the negative impact of reduced revenues.
Revenues of $4.03 billion missed the consensus mark of $4.12 billion and declined 11.6% year over year. The unfavorable year-over-year comparison might be due to the spin-off and sale of its U.S. State and Local Health and Human Services business to Veritas in October 2020, as well as the sale of the healthcare software business to Dedalus Group in April 2021. Also, a negative impact of $59 million from unfavorable exchange rate hurt quarterly revenue growth.
Quarter in Detail
Segment wise, revenues from Global Business Services (“GBS”) slid 16.5% on a year-over-year basis to $1.87 billion. The HHS business’ divestiture last October affected this segment’s top line. On an organic basis, the division’s revenues increased 3.4%, year over year, primarily aided by the strong performance of Analytics and Engineering, and Applications offerings.
DXC Technology Company. Price, Consensus and EPS Surprise
DXC Technology Company. price-consensus-eps-surprise-chart | DXC Technology Company. Quote
Global Infrastructure Services (“GIS”) revenues came in at $2.15 billion during the fiscal second quarter, down 6.8% year over year, reflecting declines in IT Outsourcing, Business Process Servicesand Modern Workplace. However, growth in Cloud and Security was a positive.
The adjusted EBIT margin was 8.6%, expanding 240 basis points (bps) year over year and 60 bps, sequentially. Margins were primarily supported by the company’s ongoing cost-optimization initiatives under which it is focusing on four cost levers — contractor conversion, scaling its GIDCs,real estate and automation through Platform X.
Balance Sheet and Other Financial Metrics
The company exited the fiscal second quarter with $2.70 billion in cash and cash equivalents compared with the $2.46 billion witnessed in the previous quarter. The long-term debt balance (net of current maturities) decreased to $4.36 billion as of Jun 30 from $4.12 billion as of Jun 30, 2021.
During the reported quarter, the company recorded operating and adjusted free cash outflows of $563 million and $404 million, respectively. In the first-half of fiscal 2022, the company generated operating and adjusted free cash outflows of $534 million and $100 million, respectively.
Outlook
For the third quarter of fiscal 2022, the company anticipates revenues to lie between $4.08 billion and $4.13 billion. The adjusted EBIT margin is expected in the range of 8.6-8.9%. DXC projects adjusted earnings per share in the band of 88-93 cents.
For fiscal 2022,the company lowered its revenue guidance range to $16.4-$16.6 billion from $16.6-$16.8 billion. However, it raised the adjusted earnings outlook to $3.52-$3.72 per share from $3.45-$3.65 per share.
Zacks Rank & Other Stocks to Consider
DXC currently carries a Zacks Rank #2 (Buy).
Other similarly-ranked stocks in the broader technology sector include Applied Materials (AMAT - Free Report) , Advanced Micro Devices (AMD - Free Report) and Perficient (PRFT - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term earnings growth rate for Applied Materials, Advanced Micro Devices and Perficient is currently pegged at 19.4%, 44.6% and 18%, respectively.