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CA's Q1 Earnings and Revenues Fall Short of Expectations

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CA Inc. reported first-quarter fiscal 2019 non-GAAP earnings of 54 cents per share, which missed the Zacks Consensus Estimate of 69 cents. Under ASC 605, earnings of 76 cents witnessed a year-over-year increase of 25%. On a constant currency basis, it grew 20% year over year.

CA reported revenues of $938 million under ASC 606, which missed the Zacks Consensus Estimate of $1.050 billion. Under ASC 605, the company reported revenues of $1.052 billion, which increased 3% on a year-over-year basis. On a constant currency (cc) basis, revenues were up 1% year over year.

The company did not host an earnings call this quarter due to its pending acquisition by Broadcom (AVGO - Free Report) .

Quarter Details
Revenues from Software licenses and maintenance (92.8% of total revenues) were $870 million. Under ASC 605, revenues of $978 million increased 1%.

Revenues from Professional Services, which contributed the rest, totaled $68 million. The company reported $75 million of revenues under ASC 605 compared with $74 million in the year-ago quarter.

Moreover, on a segment basis, revenues from CA’s Mainframe Solutions increased 3% on a year-over-year basis to $553 million. Revenues from Enterprise Solutions grew 3% on a year-over-year basis to $425 million, while Services revenues declined 1% to reach $74 million.

Geographically, total revenues from North America were $600 million, representing 64% of total revenues. Under ASC 605, revenues were up 1% year over year. International revenues of $338 million accounted for 36%. Revenues were up 6% under ASC 605.

Under ASC 606, CA reported non-GAAP operating income of $313 million and non-GAAP operating margin of 33.3%. Under ASC 605, non-GAAP operating income was $430 million, which increased 12% from the year-ago quarter. Moreover, margin expanded 400 basis points (bps) to 41%.

CA Inc. Price, Consensus and EPS Surprise

CA Inc. Price, Consensus and EPS Surprise | CA Inc. Quote

Balance Sheet and Cash Flow

CA exited the quarter with cash and cash equivalents of $3.328 billion compared with $3.405 billion in the previous quarter. The company’s total long-term debt (net of current portion) came in at $2.510 billion. During the quarter, the company generated $262 million of cash flow from operational activities.

During the quarter, the company distributed dividend worth $107 million to its shareholders. As of Jun 30, 2018, the company had approximately $407 million remaining under its current stock repurchase program. However, the company may not continue with the share repurchase program without Broadcom’s consent per the terms of the merger agreement.

Zacks Rank & Key Picks

CA currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader technology sector are Zillow Group (ZG - Free Report) and Verint Systems (VRNT - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Zillow and Verint is projected to be 15.4% and 10%, respectively.

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