DXC Technology (DXC - Free Report) is scheduled to report fourth-quarter fiscal 2019 results on May 23.
Notably, the company beat estimates in each of the trailing four quarters, the average positive surprise being 6.7%.
In the last reported quarter, the company came up with a positive earnings surprise of 9.3%. The results were mainly driven by demand strength in the company’s digital solutions.
Let's see how things are shaping up for the upcoming announcement.
Factors Likely to Drive Results
DXC Technology is benefiting from strength in the Digital business, driven by growth in cloud infrastructure and digital workplace offerings. Its acquisition of Luxoft during the fiscal fourth quarter is expected to boost the digital solutions business further.
DXC Technology is also experiencing strong demand for its operational technology security solutions in the manufacturing and energy sectors. This demand is expected to be accretive to its top line in the to-be-reported quarter. Strong momentum for its security solutions especially in Northern Europe and Asia is expected to boost its security business.
The company is working toward reducing its dependence on large deals and going for shorter-term projects, which is likely to enhance its portfolio with more deals, and rake in additional revenues.
The company is also expected to benefit from its cloud portfolio. During the last reported quarter, DXC Technology completed the buyout of ServiceNow’s (NOW - Free Report) major partners — BusinessNow and TESM — to strengthen its cloud portfolio. This buyout is likely to benefit the Cloud segment, thereby boosting the top line.
The company’s Global Infrastructure Services margins are expected to have expanded in the fiscal fourth quarter, driven by the ongoing global deployment of Bionix and delivery center rationalization.
However, margins at the Global Business Services (GBS) segment are expected to contract due to DXC Technology’s continued investments in digital hiring and expansion of digital transformation capabilities.
The company also expects currency headwinds to be an overhang on the top line.
Ongoing headwinds in legacy application services are expected to hurt GBS bookings in the to-be-reported quarter.
What the Zacks Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
DXC Technology has a Zacks Rank #2 and its Earnings ESP is 0.00%.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are a couple of stocks which you may consider as our model shows that it has the right combination of elements to post an earnings beat in their upcoming release:
Verint Systems Inc. (VRNT - Free Report) has an Earnings ESP of +2.94% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Synopsys, Inc. (SNPS - Free Report) has an Earnings ESP of +0.92% and a Zacks Rank #2.
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