Computer Sciences Corporation (CSC) reported third quarter 2010 EPS of $1.36, exceeding the Zacks Consensus Estimate of $1.23.
Revenue
The company’s third quarter 2010 revenue of $3.95 billion was flat compared to the year-ago quarter. CSC witnessed new business bookings and sequentially positive revenue growth across all business segments except the North American Public Sector.
North American Public Sector (NPS) revenue was $1.47 billion, flat compared to the previous year. Managed Services Sector (MSS) revenue was $1.61 billion, up 0.7% from the previous year. Business Solutions and Services (BSS) revenue was $0.88 billion, down 0.7% from the previous year.
New Business
The company won $6.8 billion worth of new business awards in the third quarter. Of the three lines of business, NPS accounted for $0.8 billion, BSS $0.8 billion and MSS $5.2 billion. The total wins include a previously announced contract with Zurich Financial Services and a 5-year renewal and expansion of its Raytheon (RTN) contract. The new business won year-to-date exceeded that won last year by $2.2 billion.
Operating Results
The company recorded an operating margin of 9.54%, up 15 basis points from 9.39% reported in the year-ago quarter. The margin expansion came from improved operational performance and reduction in cost and expenses, while revenue remained at almost the same level as a year ago.
Computer Sciences reported net income attributable to the company’s shareholders of $211.0 million, up 31.0% from $161.0 million reported in the year-ago quarter. The third quarter EPS was $1.36, up from $1.06 reported in the year-ago quarter.
Balance Sheet
CSC generated $131.0 million of operating cash flow in the third quarter and exited the quarter with $2.43 billion in cash and short-term investments. The company has a long-term debt balance of $4.17 billion, while the total debt balance was $4.30 billion.
The Zacks Consensus Estimate for fiscal year 2010 is $4.96, exceeding the most accurate estimate by 6 cents and reflecting a growth rate of 21.4% from the year-ago period. Only one analyst following the stock has made a downward revision in last month, while there were no upward revisions.
Guidance
The company reiterated its guidance for fiscal year 2010. Computer Sciences expects new business awards of $17 to $18 billion, revenue of $16.0 to $16.5 billion, and EPS to remain in the range of $4.80 – $5.00. Free cash flow is expected to be equal to or greater than 90% of net income.
Read the full analyst report on “CSC”
Read the full analyst report on “RTN”
Zacks Investment Research
