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DXC Technology (DXC) Stock Soars 6% on Q2 Earnings Beat
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DXC Technology Company (DXC - Free Report) shares rallied 6% in Thursday’s extended trading session following the IT services provider’s report of better-than-expected earnings results for the second quarter of fiscal 2023. The company reported second-quarter non-GAAP earnings of 75 cents per share, beating the Zacks Consensus Estimate of earnings of 72 cents.
However, the bottom line declined 16.7% from the prior-year quarter’s earnings of 90 cents per share, primarily due to reduced revenues, unfavorable currency fluctuations, lower pension income and higher-than-expected tax expenses. The negative factors were partially offset by lower interest expenses and outstanding shares.
DXC reported revenues of $3.57 billion, which marginally surpassed the consensus mark of $3.56 billion but declined 11.4% year over year. The top line was negatively impacted by unfavorable currency exchange rates. The company’s closure of operations in Russia also impacted the top line unfavorably.
DXC Technology Company. Price, Consensus and EPS Surprise
DXC’s bookings for the fiscal second quarter were $3 billion, reflecting the book-to-bill ratio of 0.83. The trailing 12-month book-to-bill ratio for the company was 1.04 at the second-quarter fiscal 2023 end.
Segment-wise, revenues from Global Business Services decreased 8.5% on a year-over-year basis to $1.71 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 offerings, partially offset by softness in the Applications business.
Global Infrastructure Services revenues were $1.85 billion in the fiscal second quarter, down 14% year over year. On an organic basis, the division’s revenues decreased 5.8% year over year.
The adjusted EBIT margin was 7%, contracting 110 basis points (bps) year over year while expanding 50 bps sequentially. Adjusted EBIT margins expanded 50 bps sequentially, primarily driven by the benefits of the better execution of the company’s cost optimization initiatives during the quarter.
On its earnings call, the company stated that it is making progress in achieving its target of reducing the cost by $500 million in the ongoing fiscal through its cost optimization efforts. Under its ongoing cost-optimization initiatives, the company 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 second quarter with $2.26 billion in cash and cash equivalents compared with the $2.21 billion witnessed in the previous quarter. The long-term debt balance (net of current maturities) declined to $3.7 billion as of Sep 30, 2022 from $3.87 billion as of Jun 30, 2022.
In the second quarter, DXC generated operating cash flow of $212 million and free cash flow of $17 million. In the first half of fiscal 2023, the company generated operating and free cash flow of $375 million and $5 million, respectively.
In the second quarter, DXC did not repurchase any shares due to a takeover interest received from a financial advisor.
Guidance
The company lowered its fiscal 2023 guidance. DXC now estimates revenues in the band of $14.4-$14.54 billion, down from its earlier guidance range of $14.6-$14.75 billion. However, it reaffirmed the adjusted earnings guidance range of $3.45-$3.75 per share.
For the third quarter of fiscal 2023, the company anticipates revenues between $3.55 billion and $3.58 billion. The adjusted EBIT margin is expected in the range of 8%-8.5%. DXC projects adjusted earnings between 80 cents and 85 cents per share.
Zacks Rank & Stocks to Consider
Currently, DXC carries a Zacks Rank #4 (Sell). Shares of DXC have declined 20.1% year to date (YTD).
The Zacks Consensus Estimate for Zscaler's first-quarter fiscal 2023 earnings has been revised 7 cents north to 26 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved 15 cents north to $1.18 per share in the past 60 days.
ZS’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 28.6%. Shares of the company have declined 58.6% YTD.
The Zacks Consensus Estimate for Celestica’s fourth-quarter 2022 earnings has increased by 9 cents to 53 cents per share over the past 30 days. For 2022, earnings estimates have moved 9.4% up to $1.86 per share in the past 30 days.
CLS' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 11.8%. Shares of the company have decreased 6% YTD.
The Zacks Consensus Estimate for Coupa's third-quarter fiscal 2023 earnings has been revised 4 cents northward to 10 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved upward by 19 cents to 44 cents per share in the past 60 days.
Coupa's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 478.1%. Shares of COUP have slumped 69.6% YTD.
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DXC Technology (DXC) Stock Soars 6% on Q2 Earnings Beat
DXC Technology Company (DXC - Free Report) shares rallied 6% in Thursday’s extended trading session following the IT services provider’s report of better-than-expected earnings results for the second quarter of fiscal 2023. The company reported second-quarter non-GAAP earnings of 75 cents per share, beating the Zacks Consensus Estimate of earnings of 72 cents.
However, the bottom line declined 16.7% from the prior-year quarter’s earnings of 90 cents per share, primarily due to reduced revenues, unfavorable currency fluctuations, lower pension income and higher-than-expected tax expenses. The negative factors were partially offset by lower interest expenses and outstanding shares.
DXC reported revenues of $3.57 billion, which marginally surpassed the consensus mark of $3.56 billion but declined 11.4% year over year. The top line was negatively impacted by unfavorable currency exchange rates. The company’s closure of operations in Russia also impacted the top line unfavorably.
DXC Technology Company. Price, Consensus and EPS Surprise
DXC Technology Company. price-consensus-eps-surprise-chart | DXC Technology Company. Quote
Quarterly Details
DXC’s bookings for the fiscal second quarter were $3 billion, reflecting the book-to-bill ratio of 0.83. The trailing 12-month book-to-bill ratio for the company was 1.04 at the second-quarter fiscal 2023 end.
Segment-wise, revenues from Global Business Services decreased 8.5% on a year-over-year basis to $1.71 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 offerings, partially offset by softness in the Applications business.
Global Infrastructure Services revenues were $1.85 billion in the fiscal second quarter, down 14% year over year. On an organic basis, the division’s revenues decreased 5.8% year over year.
The adjusted EBIT margin was 7%, contracting 110 basis points (bps) year over year while expanding 50 bps sequentially. Adjusted EBIT margins expanded 50 bps sequentially, primarily driven by the benefits of the better execution of the company’s cost optimization initiatives during the quarter.
On its earnings call, the company stated that it is making progress in achieving its target of reducing the cost by $500 million in the ongoing fiscal through its cost optimization efforts. Under its ongoing cost-optimization initiatives, the company 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 second quarter with $2.26 billion in cash and cash equivalents compared with the $2.21 billion witnessed in the previous quarter. The long-term debt balance (net of current maturities) declined to $3.7 billion as of Sep 30, 2022 from $3.87 billion as of Jun 30, 2022.
In the second quarter, DXC generated operating cash flow of $212 million and free cash flow of $17 million. In the first half of fiscal 2023, the company generated operating and free cash flow of $375 million and $5 million, respectively.
In the second quarter, DXC did not repurchase any shares due to a takeover interest received from a financial advisor.
Guidance
The company lowered its fiscal 2023 guidance. DXC now estimates revenues in the band of $14.4-$14.54 billion, down from its earlier guidance range of $14.6-$14.75 billion. However, it reaffirmed the adjusted earnings guidance range of $3.45-$3.75 per share.
For the third quarter of fiscal 2023, the company anticipates revenues between $3.55 billion and $3.58 billion. The adjusted EBIT margin is expected in the range of 8%-8.5%. DXC projects adjusted earnings between 80 cents and 85 cents per share.
Zacks Rank & Stocks to Consider
Currently, DXC carries a Zacks Rank #4 (Sell). Shares of DXC have declined 20.1% year to date (YTD).
Some better-ranked stocks from the broader Computer and Technology sector are Zscaler (ZS - Free Report) , Celestica (CLS - Free Report) and Coupa Software . Zscaler and Celestica each sport a Zacks Rank #1 (Strong Buy) at present, while Coupa carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Zscaler's first-quarter fiscal 2023 earnings has been revised 7 cents north to 26 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved 15 cents north to $1.18 per share in the past 60 days.
ZS’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 28.6%. Shares of the company have declined 58.6% YTD.
The Zacks Consensus Estimate for Celestica’s fourth-quarter 2022 earnings has increased by 9 cents to 53 cents per share over the past 30 days. For 2022, earnings estimates have moved 9.4% up to $1.86 per share in the past 30 days.
CLS' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 11.8%. Shares of the company have decreased 6% YTD.
The Zacks Consensus Estimate for Coupa's third-quarter fiscal 2023 earnings has been revised 4 cents northward to 10 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved upward by 19 cents to 44 cents per share in the past 60 days.
Coupa's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 478.1%. Shares of COUP have slumped 69.6% YTD.