DXC Technology DXC delivered better-than-expected results for first-quarter fiscal 2020. The company reported non-GAAP earnings of 21 cents per share, which beat the Zacks Consensus Estimate by 91%. The figure, however, declined from the prior-year quarter’s $1.74.
Revenues of $4.5 billion surpassed the consensus mark of $4.24 billion. However, quarterly revenues fell 7.9% year over year. Termination of certain customer accounts, price concessions and unfavorable currency-exchange rates mainly affected the top line. Currency headwinds of about $40 million also hurt revenues.
Quarter in Detail
Segment wise, revenues from Global Business Services (“GBS”) edged up 0.7% on a year-over-year basis to $2.17 billion, reflecting benefits from the Luxoft acquisition. However, the resolution of customer disputes took a toll on the segment’s revenues.
During the reported quarter, the company won $3.5 billion worth of new business awards for the GBS segment.
DXC Technology Company. Price and EPS Surprise
DXC Technology Company. price-eps-surprise | DXC Technology Company. Quote
Global Infrastructure Services (“GIS”) revenues during the fiscal first quarter came in at $2.33 billion, down 12.4% year over year, reflecting a revenue run-off and the termination of certain customer accounts.
During the reported quarter, the company won $1.8 billion worth of new business awards for the GIS segment.
Within the company’s enterprise technology stack business, IPO layer revenues declined 18.7% year over year on account terminations and price concessions. Cloud and security revenues fell 6% year over year, due to project deferrals and revenue run-offs.
Application layer revenues declined 7.5%. IPO revenues fell 18.7% year over year.
Adjusted EBIT margin was 4.2%, contracting 910 basis points year over year. Non-GAAP income from continuing operations was $190 million compared with the year-earlier quarter’s $652 million.
Balance Sheet and Other Financial Metrics
The company exited the quarter with $5.51 billion in cash and cash equivalents compared with the $3.68 billion witnessed in the previous quarter. Long-term debt balance (net of current maturities) increased to $10.33 billion as of Jun 30 from the $8.67 billion witnessed at the end of fiscal 2020.
Cash flow from operating activities came in at $119 million. Adjusted free cash flow was negative $28 million during the fiscal first quarter.
For the fiscal second quarter, the company anticipates revenues between $4.4 billion and $4.45 billion. Operating margin is expected in the range of 5% to 5.5%. DXC projects adjusted EPS in the band of 30-35 cents.
Zacks Rank and Other Key Picks
Currently, DXC carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector include Benefitfocus BNFT, Cogent Communications Holdings CCOI and Synaptics SYNA, all carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term earnings growth rate for Benefitfocus, Cogent and Synaptics is currently pegged at 30%, 10.6%, and 10%, respectively.
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