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DXC Technology's (DXC) Q4 Earnings & Revenue Miss Estimates

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DXC Technology (DXC - Free Report) reported fourth-quarter fiscal 2022 non-GAAP earnings of 84 cents per share, missing the Zacks Consensus Estimate of earnings of $1.00 per share. However, the bottom line improved 13.5% from the prior-year quarter’s earnings of 74 cents per share, primarily driven by expanding margins and lower interest expenses and outstanding shares, which more than offset the negative impact of reduced revenues.

DXC reported revenues of $4.01 billion, lagging the consensus mark of $4.13 billion, and declined 8.6% year over year. The top line was negatively impacted by unfavorable currency exchange rates. The company’s closure of operations in Russia impacted the top line unfavorably.

Quarterly Details

DXC’s bookings for the fiscal fourth quarter were $4.8 billion, reflecting the book-to-bill ratio of 1.20.

DXC Technology Company. Price, Consensus and EPS Surprise

DXC Technology Company. Price, Consensus and EPS Surprise

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

Segment-wise, revenues from Global Business Services (“GBS”) decreased 5.4% on a year-over-year basis to $1.89 billion. On an organic basis, the division’s revenues improved 3.4% year over year. The upside was primarily aided by the strong performance of Analytics and Engineering, and Applications offerings.

Global Infrastructure Services (“GIS”) revenues were $2.12 billion in the fiscal fourth quarter, down 11.3% year over year. On an organic basis, the division’s revenues decreased 8% year over year, reflecting improvements in Cloud and Security revenues.

The adjusted EBIT margin was 8.5%, expanding 100 basis points (bps) year over year and contracting 20 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 global innovation and delivery centers, real estate, and automation through Platform X.

Balance Sheet and Cash Flow

DXC exited the fiscal fourth quarter with $2.67 billion in cash and cash equivalents compared with $2.92 billion witnessed in the previous quarter. The long-term debt balance (net of current maturities) declined to $4.07 billion as of Mar 31, 2022, from $4.24 billion as of Dec 31, 2021.

During the fourth quarter, DXC recorded operating and adjusted free cash of $271 million and $93 million, respectively. This strong cash flow performance was primarily driven by favorable timing on both payments and receipts in the quarter reported.

In fiscal 2022, the company generated operating and adjusted free cash of $1.50 billion and $743 million, respectively.

In the fourth quarter, the company repurchased shares worth $271 million, while it repurchased shares worth $634 million in full fiscal 2022.

DXC anticipates self-funded share repurchases worth $1 billion in the next year.

Full-Year Highlights   

For full-year 2022, DXC reported revenues of $16.27 billion, down 8.26% year over year.

The company reported non-GAAP earnings of $3.50 per share compared with 2021’s earnings of $2.43 per share.

The adjusted EBIT margin expanded 230 bps to 8.5% in fiscal 2022.

Guidance

For the first quarter of fiscal 2023, the company anticipates revenues between $3.700 billion and $3.750 billion. The adjusted EBIT margin is expected in the range of 7.5% to 8%. DXC projects adjusted earnings between 80 cents and 85 cents per share.

For fiscal 2023, DXC estimated revenues in the band of $14,900-$15,050 billion. It projected adjusted earnings to be $3.85-$4.15 per share.

Zacks Rank & Key Picks

DXC currently carries a Zacks Rank #4 (Sell). Shares of DXC have declined 20.3% in the past year.

Some better-ranked stocks from the broader Computer and Technology sector are Avnet (AVT - Free Report) , Analog Devices (ADI - Free Report) and Axcelis Technologies (ACLS - Free Report) . While Avnet and Axcelis sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank of 2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Avnet's fourth-quarter fiscal 2022 earnings has been revised 55 cents northward to $1.96 per share over the past 30 days. For 2022, earnings estimates have moved 20.5% north to $6.83 per share in the past 30 days.

Avnet's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 21.2%. Shares of AVT have gained 3.9% in the past year.

The Zacks Consensus Estimate for Axcelis' second-quarter 2022 earnings has been revised 3 cents upward to 99 cents per share over the past 30 days. For 2022, ACLS' earnings estimates have moved 41 cents north to $4.40 per share in the past 30 days.

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The Zacks Consensus Estimate for Analog Devices' third-quarter fiscal 2022 earnings has been revised 24 cents upward to $2.42 per share over the past seven days. For fiscal 2022, earnings estimates have moved 81 cents north to $9.24 per share in the past seven days.

Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 7.7%. Shares of ADI have decreased 1% in the past year.