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DXC Technology (DXC) Down 18.7% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for DXC Technology Company (DXC - Free Report) . Shares have lost about 18.7% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is DXC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
DXC Technology's Q4 Earnings & Revenues Top Estimates
DXC Technology reported better-than-expected results for fourth-quarter fiscal 2018, wherein its top and bottom lines came ahead of the Zacks Consensus Estimate and also marked robust year-over-year improvements. The robust quarterly results were mainly driven by the merger of the Computer Sciences Corporation and Enterprise Services Division of Hewlett Packard Enterprise.
Notably, in 2016, Hewlett Packard Enterprise entered into a spin-off-merger agreement with Computer Sciences Corporation, wherein it agreed to spin-off its Enterprise Services division and merge the same with the latter’s businesses. The transaction closed on Apr 1, 2017, and the new entity was named DXC Technology.
Coming back to the fiscal fourth-quarter results, the company reported non-GAAP earnings of $2.28 per share, which surpassed the Zacks Consensus Estimate of $2.19, and also increased year over year.
Quarter Details
Revenues in the quarter came in at $6.294 billion and surpassed the Zacks Consensus Estimate of $$6.12 billion. On a pro forma combined company basis, the company registered year-over-year growth of 4.3%. However, on a constant-currency basis, revenues edged down 1.3% year over year.
Segment wise, pro forma revenues from Global Business Services (GBS) increased 3.3% on a year-over-year basis to $2.36 billion. The company continues to witness shift in traditional application services to enterprise and cloud applications.
Global Infrastructure Services (GIS) revenues during the fiscal fourth quarter came in at $3.22 billion, marking 3.3% year-over-year growth on a pro forma combined company basis. The year-over-year improvement was mainly driven by growth in the company’s “cloud and platform services as well as mobility and workplace.”
USPS revenues came in at $710 million during the quarter, up 11.1% year over year on a pro forma combined company basis. Notably, this was the last quarter when the company reported USPS results as its operating segment. As the spin-off of USPS will close on June 1, this year, the company will not include this segment under its operating results anymore.
The company’s adjusted operating income from continuing operations, on a pro forma combined company basis, amounted to $1.03 billion. Adjusted operating margin came in at 16.2% as compared with 10.2% reported in the prior-year quarter, on a pro forma combined company basis. The robust improvement was mainly driven by the achievement of approximately $1.1 billion of cost synergies from CSC and HPE’s Enterprise Services division merger during fiscal 2018.
Adjusted net income from continuing operations came in at $661 million during the quarter as compared with $387 million reported in the year-earlier period on a pro forma combined company basis.
The company exited the reported quarter with $2.648 billion in cash and cash equivalents compared with $2.926 billion recorded in the previous quarter. Long-term debt balance (net of current maturities) was $6.306 billion. Net cash provided by operating activities during the fiscal came in at $3.243 billion. Adjusted free cash flow for fiscal 2018 came in at $2.427 billion. During this period, the company returned $306 million to shareholders through share buyback and dividend payments.
Fiscal 2019 Outlook
The company initiated fiscal 2019 outlook. For the fiscal, DXC Technology projects revenues of $21.5-$22 billion. The company anticipates non-GAAP earnings per share between $7.75 and $8.15. During the fiscal, the company projects incremental cost savings of $400 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been five revisions lower for the current quarter.
At this time, DXC has a nice Growth Score of B. Its Momentum is doing a bit better with an A. The stock was also allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise DXC has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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DXC Technology (DXC) Down 18.7% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for DXC Technology Company (DXC - Free Report) . Shares have lost about 18.7% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is DXC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
DXC Technology's Q4 Earnings & Revenues Top Estimates
DXC Technology reported better-than-expected results for fourth-quarter fiscal 2018, wherein its top and bottom lines came ahead of the Zacks Consensus Estimate and also marked robust year-over-year improvements. The robust quarterly results were mainly driven by the merger of the Computer Sciences Corporation and Enterprise Services Division of Hewlett Packard Enterprise.
Notably, in 2016, Hewlett Packard Enterprise entered into a spin-off-merger agreement with Computer Sciences Corporation, wherein it agreed to spin-off its Enterprise Services division and merge the same with the latter’s businesses. The transaction closed on Apr 1, 2017, and the new entity was named DXC Technology.
Coming back to the fiscal fourth-quarter results, the company reported non-GAAP earnings of $2.28 per share, which surpassed the Zacks Consensus Estimate of $2.19, and also increased year over year.
Quarter Details
Revenues in the quarter came in at $6.294 billion and surpassed the Zacks Consensus Estimate of $$6.12 billion. On a pro forma combined company basis, the company registered year-over-year growth of 4.3%. However, on a constant-currency basis, revenues edged down 1.3% year over year.
Segment wise, pro forma revenues from Global Business Services (GBS) increased 3.3% on a year-over-year basis to $2.36 billion. The company continues to witness shift in traditional application services to enterprise and cloud applications.
Global Infrastructure Services (GIS) revenues during the fiscal fourth quarter came in at $3.22 billion, marking 3.3% year-over-year growth on a pro forma combined company basis. The year-over-year improvement was mainly driven by growth in the company’s “cloud and platform services as well as mobility and workplace.”
USPS revenues came in at $710 million during the quarter, up 11.1% year over year on a pro forma combined company basis. Notably, this was the last quarter when the company reported USPS results as its operating segment. As the spin-off of USPS will close on June 1, this year, the company will not include this segment under its operating results anymore.
The company’s adjusted operating income from continuing operations, on a pro forma combined company basis, amounted to $1.03 billion. Adjusted operating margin came in at 16.2% as compared with 10.2% reported in the prior-year quarter, on a pro forma combined company basis. The robust improvement was mainly driven by the achievement of approximately $1.1 billion of cost synergies from CSC and HPE’s Enterprise Services division merger during fiscal 2018.
Adjusted net income from continuing operations came in at $661 million during the quarter as compared with $387 million reported in the year-earlier period on a pro forma combined company basis.
The company exited the reported quarter with $2.648 billion in cash and cash equivalents compared with $2.926 billion recorded in the previous quarter. Long-term debt balance (net of current maturities) was $6.306 billion. Net cash provided by operating activities during the fiscal came in at $3.243 billion. Adjusted free cash flow for fiscal 2018 came in at $2.427 billion. During this period, the company returned $306 million to shareholders through share buyback and dividend payments.
Fiscal 2019 Outlook
The company initiated fiscal 2019 outlook. For the fiscal, DXC Technology projects revenues of $21.5-$22 billion. The company anticipates non-GAAP earnings per share between $7.75 and $8.15. During the fiscal, the company projects incremental cost savings of $400 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been five revisions lower for the current quarter.
DXC Technology Company. Price and Consensus
DXC Technology Company. Price and Consensus | DXC Technology Company. Quote
VGM Scores
At this time, DXC has a nice Growth Score of B. Its Momentum is doing a bit better with an A. The stock was also allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise DXC has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.