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CSRA to Gain From Solid Backlog, Deal Wins in Q3 Earnings

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CSRA Inc. is set to report third-quarter fiscal 2018 earnings on Feb 7. We expect the company to deliver strong results backed bysolid backlog,strong partner base, frequent contract wins, improving federal spending environment and revenue visibility.

Notably, the company beat the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 4.43%. Last quarter, the company delivered a positive earnings surprise of 6.67%.

In the second quarter of fiscal 2018, its earnings were 46 cents per share, which beat the Zacks Consensus Estimate by a penny. However, the figure slumped 9.8% from the year-ago quarter. Moreover, revenues increased 0.7% year over year to $1.27 billion, beating the Zacks Consensus Estimate.

Total backlog at the end of the last quarter was $17.7 billion, which increased 14% sequentially. Per management, revenue visibility has improved, with 98% revenues likely to come from existing contracts.

The Zacks Consensus Estimate for earnings and revenues for the third quarter 2018 is pegged at 47 cents and $1.26 billion, respectively.

Shares of CSRA have returned 0.1% in a year, substantially underperforming the 29.9% rally of the industry.

 

Key Catalysts

CSRA is benefiting from its domain expertise and strong partner base that includes the likes of ServiceNow Inc. (NOW - Free Report) , Microsoft Corporation (MSFT - Free Report) and Red Hat among others.

Additionally, per Bloomberg Government's new BGov200 list, CSRA emerged as the #1 provider of technology services to the federal government.

The company’s strategic acquisitions like NES have been a significant revenue generator. However, CSRA does not intend to make acquisitions at least for the next couple of quarters.

As anticipated by management, CSRA’s top-line growth is likely to accelerate year over year in the soon-to-be-reported quarter, primarily due to higher spending.

The company continues to win contracts regularly. During the quarter, Environmental Protection Agency (EPA) awarded Scientific and Technical Support (STS) contract to CSRA, which holds a potential value of $24.5 million over a period of five years.

Moreover, CSRA is expected to gain from the Modernizing Government Technology Act.

CSRA Inc. Price and EPS Surprise

CSRA Inc. Price and EPS Surprise | CSRA Inc. Quote

Why a Likely Positive Surprise?

Our proven model shows that CSRA is likely to beat earnings due to the favorable combination of a Zacks Rank #3 (Hold) and an Earnings ESP of +1.06%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Key Pick

Here is a stock you may want to consider as our proven model shows that it has the right combination of elements to post an earnings beat this quarter.

NVIDIA (NVDA - Free Report) has an Earnings ESP of +6.87% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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