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CA Inc. (CA) Beats on Q2 Earnings & Revenues, Guides Well
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CA Inc. (CA - Free Report) reported better-than-expected second-quarter fiscal 2017 results.
The company posted adjusted earnings (including stock-based compensation but excluding other one-time items) of 63 cents, which came ahead of the Zacks Consensus Estimate of 57 cents.
On a GAAP basis, earnings came in at 50 cents compared with 39 cents reported in the year-ago quarter.
Quarter Details
CA reported revenues of $1.018 billion, which not only increased 1.3% from the year-ago quarter but also surpassed the Zacks Consensus Estimate of $1.006 billion. The year-over-year increase was primarily due to a 32.2% increase in Software fees and other revenues (12% of total revenue). However, Subscription and maintenance revenues (81% of total revenue) and Professional Services revenues (7%) decreased 0.9% and 9.6%, respectively.
Moreover, on a segment basis, revenues from CA’s Mainframe Solutions were down a marginal 0.7% year over year to $550 million. Revenues from Enterprise Solutions increased 6.8% on a year-over-year basis to $393 million, whereas Services revenues decreased 9.6% year over year to $75 million.
North America revenues increased 2% on a year-over-year basis, whereas International revenues were flat in terms of local currency. The company witnessed a 47% decrease in total bookings. According to the press release, bookings were down, “primarily due to a renewal with a large system integrator in excess of $500 million that occurred during the second quarter of fiscal 2016 and, to a lesser extent, a decrease in mainframe renewals.”
Moving on, CA reported adjusted income from continuing operations before interest and income taxes (including stock-based compensation but excluding other one-time items) of $385 million, up 15.3% year over year. Non-GAAP operating income from continuing operations before interest and income taxes came in at $410 million compared with $357 million reported in the year-ago quarter. The increase was due to better efficiencies and executions and the impact of the acquisition-related expenses in the year-ago period.
As a percentage of revenues, adjusted income from continuing operations before interest and income taxes was up 459 basis points (bps) to 37.8%, primarily due to lower operating expenses. Adjusted operating expenses decreased 5.5% year over year to $494 million, while as a percentage of revenues, it decreased 351 bps year over year to 48.5%.
CA’s adjusted net income from continuing operations (excluding amortization and other gains but including stock-based compensation) was approximately $261.8 million. On a GAAP basis, net income from continuing operations came in at $212 million.
CA exited the quarter with cash and cash equivalents of $2.585 billion compared with $2.776 billion in the previous quarter. The company’s total long-term debt (including current portion) came in at $1.950 billion. During the quarter, the company used $58 million in cash from operating activities.
In the second quarter, CA repurchased 1.5 million shares worth $50 million. Management approved a $650 million stock repurchase program as of Sep 30, 2016. The company also paid $107 million as dividends to its shareholders during the quarter.
Fiscal 2017 Guidance
CA reiterated its fiscal 2017 guidance. The company continues to expect total revenue to be flat to up 1%, which translates to $4.03 billion to $4.07 billion. The Zacks Consensus Estimate for fiscal 2017 revenues is pegged at $4.055 billion.
CA expects non-GAAP earnings per share from continuing operations to increase in the range of 2%-5%. According to the company, “At September 30, 2016 exchange rates, this translates to reported non-GAAP diluted earnings per share from continuing operations of $2.49 to $2.54.” The Zacks Consensus Estimate for fiscal 2017 is pegged at $2.33.
The company continues to expect non-GAAP operating margin to be approximately of 38%, whereas, non-GAAP effective tax rate is expected to be in the range of 28% to 29%.
The company however updated its guidance for outlook for cash flow from continuing operations. The company now expects cash flow from operations to be in the range of -3% to +1% (previously in a range of 1%–5%). Considering the exchange rates as of Sep 30, 2016, this translates to a range of $1.01 billion to $1.05 billion.
CA reported better-than-expected second-quarter results. The year-over-year revenue comparison was also favorable. The company, also, provided an encouraging fiscal 2017 outlook.
Furthermore, we believe that the increased efficiency offered by the wide range of products will attract customers across sectors, lending stability to the business model. We are positive about CA’s increased cloud exposure. A modest cash position and regular share repurchase are also encouraging.
CA has also adopted a “go to market” sales strategy. This brings together all the commercial functions including sales, marketing, brand management, pricing and consumer insight. The integration of the marketing functions helps to lower costs, thereby improving the bottom line.
On the other hand, increasing competition from Oracle (ORCL - Free Report) , International Business Machines (IBM - Free Report) and HP Inc. (HPQ - Free Report) and exposure to Europe remain the near-term headwinds.
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CA Inc. (CA) Beats on Q2 Earnings & Revenues, Guides Well
CA Inc. (CA - Free Report) reported better-than-expected second-quarter fiscal 2017 results.
The company posted adjusted earnings (including stock-based compensation but excluding other one-time items) of 63 cents, which came ahead of the Zacks Consensus Estimate of 57 cents.
On a GAAP basis, earnings came in at 50 cents compared with 39 cents reported in the year-ago quarter.
Quarter Details
CA reported revenues of $1.018 billion, which not only increased 1.3% from the year-ago quarter but also surpassed the Zacks Consensus Estimate of $1.006 billion. The year-over-year increase was primarily due to a 32.2% increase in Software fees and other revenues (12% of total revenue). However, Subscription and maintenance revenues (81% of total revenue) and Professional Services revenues (7%) decreased 0.9% and 9.6%, respectively.
Moreover, on a segment basis, revenues from CA’s Mainframe Solutions were down a marginal 0.7% year over year to $550 million. Revenues from Enterprise Solutions increased 6.8% on a year-over-year basis to $393 million, whereas Services revenues decreased 9.6% year over year to $75 million.
North America revenues increased 2% on a year-over-year basis, whereas International revenues were flat in terms of local currency. The company witnessed a 47% decrease in total bookings. According to the press release, bookings were down, “primarily due to a renewal with a large system integrator in excess of $500 million that occurred during the second quarter of fiscal 2016 and, to a lesser extent, a decrease in mainframe renewals.”
Moving on, CA reported adjusted income from continuing operations before interest and income taxes (including stock-based compensation but excluding other one-time items) of $385 million, up 15.3% year over year. Non-GAAP operating income from continuing operations before interest and income taxes came in at $410 million compared with $357 million reported in the year-ago quarter. The increase was due to better efficiencies and executions and the impact of the acquisition-related expenses in the year-ago period.
As a percentage of revenues, adjusted income from continuing operations before interest and income taxes was up 459 basis points (bps) to 37.8%, primarily due to lower operating expenses. Adjusted operating expenses decreased 5.5% year over year to $494 million, while as a percentage of revenues, it decreased 351 bps year over year to 48.5%.
CA’s adjusted net income from continuing operations (excluding amortization and other gains but including stock-based compensation) was approximately $261.8 million. On a GAAP basis, net income from continuing operations came in at $212 million.
CA exited the quarter with cash and cash equivalents of $2.585 billion compared with $2.776 billion in the previous quarter. The company’s total long-term debt (including current portion) came in at $1.950 billion. During the quarter, the company used $58 million in cash from operating activities.
In the second quarter, CA repurchased 1.5 million shares worth $50 million. Management approved a $650 million stock repurchase program as of Sep 30, 2016. The company also paid $107 million as dividends to its shareholders during the quarter.
Fiscal 2017 Guidance
CA reiterated its fiscal 2017 guidance. The company continues to expect total revenue to be flat to up 1%, which translates to $4.03 billion to $4.07 billion. The Zacks Consensus Estimate for fiscal 2017 revenues is pegged at $4.055 billion.
CA expects non-GAAP earnings per share from continuing operations to increase in the range of 2%-5%. According to the company, “At September 30, 2016 exchange rates, this translates to reported non-GAAP diluted earnings per share from continuing operations of $2.49 to $2.54.” The Zacks Consensus Estimate for fiscal 2017 is pegged at $2.33.
The company continues to expect non-GAAP operating margin to be approximately of 38%, whereas, non-GAAP effective tax rate is expected to be in the range of 28% to 29%.
The company however updated its guidance for outlook for cash flow from continuing operations. The company now expects cash flow from operations to be in the range of -3% to +1% (previously in a range of 1%–5%). Considering the exchange rates as of Sep 30, 2016, this translates to a range of $1.01 billion to $1.05 billion.
CA INC Price, Consensus and EPS Surprise
CA INC Price, Consensus and EPS Surprise | CA INC Quote
Our Take
CA reported better-than-expected second-quarter results. The year-over-year revenue comparison was also favorable. The company, also, provided an encouraging fiscal 2017 outlook.
Furthermore, we believe that the increased efficiency offered by the wide range of products will attract customers across sectors, lending stability to the business model. We are positive about CA’s increased cloud exposure. A modest cash position and regular share repurchase are also encouraging.
CA has also adopted a “go to market” sales strategy. This brings together all the commercial functions including sales, marketing, brand management, pricing and consumer insight. The integration of the marketing functions helps to lower costs, thereby improving the bottom line.
On the other hand, increasing competition from Oracle (ORCL - Free Report) , International Business Machines (IBM - Free Report) and HP Inc. (HPQ - Free Report) and exposure to Europe remain the near-term headwinds.
CA has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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