Computer Science Corporation (CSC) has been in the news recently for winning some important contracts, though their impact on near-term earnings is not significant.
In its contract with the Department of Veterans Affairs, the company will be providing healthcare claims processing system and services. The solutions are intended to improve the cost efficiency of the department, which may then extend the one-year contract period by up to four years. While the contract is expected to help the top line, the exact impact cannot be ascertained as exact details were not disclosed.
The U.S. Army Material Command extended its contract for another two years, so CSC will continue providing information technology and logistics services under the Army’s Logistics Modernization Program (LMP). The extension came for a monetary consideration of $261 million during the third quarter of 2010.
Third in the line is the Conseco Services contract. As per the terms of this agreement, CSC will provide maintenance and support to two of Conseco’s insurance administration systems. Although the monetary details of this contract were also not disclosed, we expect this five-year agreement to generate recurring revenue for CSC.
The company is winning these contracts through its aggressive marketing strategy, and its high quality technology-enabled solutions and services are attracting more customer attention.
There has been little momentum in estimate revisions ahead of the company’s earnings release next week (expected on February 10). The Zacks Consensus Estimate for the quarter is currently $1.23, representing a 16.0% increase from the year-ago quarter. We see no estimate revisions for either the December or March quarters in recent days. For the next fiscal year, however, one estimate has recently been raised.
The earnings surprise history has however been positive, although the preceding four-quarter positive surprise of 14.29% has been skewed by the 45.10% positive surprise for the June quarter. The average surprise of the remaining three quarters is also positive, so the possibility of another positive surprise cannot be ruled out.
This lack of directional move in estimate revisions is reflected in the Zacks # 3 Rank (‘hold’) and “Neutral” recommendation.
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