Falls Church, Virginia-based Computer Sciences Corp. (CSC) has raised its full-year earnings per share to $5.05 – $5.15 per share, up from its previous guidance of $4.80 – $5.00 per share.
The company expects to meet its revenue and operating margin targets. Accordingly, the revenue guidance remains unchanged at $16.0 billion to $16.5 billion, while operating margin guidance remains in the 8.6% to 8.8% range. The operating margin guidance implies an expansion of 25 to 50 basis points from last year.
Given the fact that both revenue and operating margin targets are unchanged, it appears that the company expects a one-time gain that will drive earnings higher. However, the guidance revision announcement did not throw light on the matter. Earnings are expected to improve in fiscal 2011, as CSC intends to retire $500 million of debt, which will reduce net interest expense.
This apart, the company expects new business wins to increase to $19.0 billion, compared to the previous guidance range of $17.0 billion to $18.0 billion.
CSC reported decent third quarter results, with EPS coming in at $1.36, exceeding the Zacks Consensus Estimate of $1.23. Revenue for the quarter was $3.95 billion, flat compared to the year-ago quarter.
CSC booked new business and saw sequentially positive revenue growth across all business segments except the North America Public Sector. The company also won new business worth $6.8 billion in the third quarter, and exited the quarter with $2.43 billion of cash and short term investments.
The steady flow of new business is a positive sign, especially in the government vertical. On the other hand, we are a bit concerned about the intense competition that CSC faces in the IT and cloud computing space.
We reiterate our Neutral rating on shares of CSC.
Read the full analyst report on “CSC”
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