DXC Technology Company ( DXC Quick Quote DXC - Free Report) reported mixed results in the fourth quarter of fiscal 2023, wherein adjusted earnings matched the Zacks Consensus Estimate, while revenues fell short of the same. The company reported fourth-quarter non-GAAP earnings of $1.02 per share, in line with the Zacks Consensus Estimate.
The bottom line increased 21.4% from the prior-year quarter’s earnings of 84 cents per share. The year-over-year improvement was primarily driven by lower interest expenses and a reduction in share counts, partially offset by lower sales volumes and foreign exchange headwinds.
DXC reported revenues of $3.59 billion, which marginally fell short of the consensus mark of $3.62 billion and declined 10.4% year over year. The top line was negatively impacted by a tough year-over-year comparison related to the lower resale and lower-than-anticipated levels of project revenues in the reported quarter.
DXC’s bookings in the fiscal fourth quarter were $3.7 billion, reflecting the book-to-bill ratio of 1.04. The trailing 12-month book-to-bill ratio for the company was 1.02 at the fourth-quarter fiscal 2023 end.
Segment-wise, revenues from Global Business Services decreased 7.5% on a year-over-year basis to $1.75 billion. On an organic basis, the division’s revenues improved 3.3% year over year. The upside was primarily aided by the strong performance of Analytics and Engineering offerings, where revenues increased 8.5% on an organic basis.
Global Infrastructure Services revenues were $1.84 billion in the fiscal fourth quarter, down 13% year over year. On an organic basis, the division’s revenues decreased 8.5% year over year. The decline was primarily due to lower Modern Workplace and Cloud Infrastructure & ITO revenues.
The company’s adjusted operating income declined to $320 million in the fourth quarter from $342 million in the year-ago quarter. However, the adjusted operating margin improved to 8.9% from 8.5%.
Balance Sheet and Cash Flow
DXC exited the fiscal fourth quarter with $1.86 billion in cash and cash equivalents compared with the $2.09 billion witnessed in the previous quarter. The long-term debt balance (net of current maturities) increased to $3.9 billion as of Mar 31, 2023 from $3.85 billion as of Dec 31, 2022.
In the fourth quarter, DXC generated operating cash flow of $415 million and free cash flow of $269 million. In fiscal 2023, the company generated operating and free cash flows of $1.42 billion and $737 million, respectively.
In fiscal 2023, DXC repurchased shares worth $669 million. Moreover, the company revealed that it completed its $1 billion share repurchase initiative in April 2023, and concurrent with its fourth-quarter fiscal 2023 earnings release, it announced a new share repurchase authorization of $1 billion.
DXC initiated guidance for the first quarter and full-fiscal 2024. For the first quarter of fiscal 2024, the company anticipates revenues between $3.45 billion and $3.58 billion. The adjusted EBIT margin is expected in the range of 7.5%-8%. DXC projects adjusted earnings between 80 cents and 85 cents per share for the first quarter.
For fiscal 2024, DXC estimates revenues in the band of $14.40-$14.55 billion. It projects the adjusted EBIT margin and EPS in the ranges of 8%-8.5% and $3.80-$4.05, respectively.
Zacks Rank & Stocks to Consider
Currently, DXC carries a Zacks Rank #3 (Hold). Shares of DXC have declined 10.1% year to date (YTD).
Some better-ranked stocks from the broader technology sector are
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