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CA Inc. Beats 4Q Earnings, Rev Down

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CA Inc. (CA - Free Report) reported fourth-quarter 2013 adjusted earnings per share (“EPS”) of 65 cents, ahead of the Zacks Consensus Estimate of 53 cents.


Total revenue in the reported quarter was $1.15 billion, down 3.4% from $1.19 billion in the year-ago quarter. When adjusted for currency, revenues declined 2.0% year over year. This was due to a decline in Mainframe Solutions and the Enterprise solutions business.

Revenue Segments

Mainframe Solutions generated revenues of $620.0 million, down 1.4% year over year. Enterprise Solutions’ revenues were $432.0 million, down 7.3% year over year. Services’ revenues were down 6.5% year over year to $99.0 million.


The company witnessed total bookings of $1.46 billion, down 5.0% on a reported basis. North America bookings were $986.0 million, up 10.0% on a reported basis. The company won a large government contract, which constituted a major part of this booking.

International Bookings were $477.0 million, down 26.0% from the year-ago quarter.

The company renewed 27 license agreements during fiscal 2013, with contract value in excess of $10.0 million each.

Operating Results

GAAP income from continuing operations before interest and income taxes was $274.0 million, down 8.9% from $301.0 million reported in the year-ago quarter. Therefore, the operating margin for the quarter was 24.0% down from 25.0% reported in the year-ago quarter.

On a GAAP basis, net income was $242.0 million or 53 cents per share versus $211.0 million 45 cents per share in the year-ago quarter. Excluding special items, such as software amortization, intangible amortization, restructuring and other and hedging gains/losses, but including stock-based compensation expenses, non-GAAP net income in the fourth quarter stood at 65 cents per share versus 52 cents in the prior-year quarter.

Balance Sheet, Cash Flow & Share Repurchase

CA generated cash flow from continuing operations of $570 million, up 0.7% from $566.0 million on a reported basis. Cash, cash equivalents and investments was $2.78 billion, up from $2.55 billion reported in previous quarter. Considering the company’s total outstanding debt of $1.29 billion, net cash, cash equivalents and investments was $1.35 billion.

Moreover, during the reported quarter, CA repurchased around 3 million shares of stock for $74.0 million.


For fiscal 2014, the company expects total revenue is expected to decline in the range of 4.0% to 2.0%. CA expects growth in non-GAAP earnings per share from continuing operations to decline in the range of 4.0%–7.0%, amounting to $2.35 to $2.43. Cash flow from continuing operations is expected to decline in the range of 29.0% to 35.0%. Moreover, the company has also declared that it would be taking a charge of approximately $150 million in the fiscal year 2014, which will help them to take care of its business priorities.


CA Inc. reported mixed fourth-quarter results, with bottom-line exceeding the Zacks Consensus Estimate and revenues missing the same. Most of CA’s revenue generating segments was adversely affected during the reported quarter, yet cash position improved sequentially. The company’s guidance for fiscal 2014 appears to be modest.

However, we are positive about the CA Inc’s increased cloud exposure. Decent renewal rate, modest cash position and share repurchase also appear encouraging. On the other hand, increasing competition and exposure to Europe remain concerns.

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

Investors can also consider other stocks in the technology industry that are currently performing well such as Aspen Tech Inc. (AZPN - Free Report) , Progress Software (PRGS) with a Zacks Rank #1 (Strong Buy) and Symantec Corp. (SYMC - Free Report) having a Zacks Rank#2.

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