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Why Is DXC Technology Company. (DXC) Down 9.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for DXC Technology Company. (DXC - Free Report) . Shares have lost about 9.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is DXC Technology Company. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
DXC Technology’s Q2 Earnings Top, Revenues Miss Estimates
DXC reported second-quarter fiscal 2022 non-GAAP earnings of 90 cents per share, beating the Zacks Consensus Estimate of 84 cents. The bottom line also surged approximately 41% from the prior-year quarter’s earnings of 64 cents per share, mainly on expanding margins and lower interest expenses and tax rate, which more than offset the negative impact of reduced revenues.
Revenues of $4.03 billion missed the consensus mark of $4.12 billion and declined 11.6% year over year. The unfavorable year-over-year comparison might be due to the spin-off and sale of its U.S. State and Local Health and Human Services business to Veritas in October 2020, as well as the sale of the healthcare software business to Dedalus Group in April 2021. Also, a negative impact of $59 million from unfavorable exchange rate hurt quarterly revenue growth.
Quarter in Detail
Segment wise, revenues from Global Business Services (“GBS”) slid 16.5% on a year-over-year basis to $1.87 billion. The HHS business’ divestiture last October affected this segment’s top line. On an organic basis, the division’s revenues increased 3.4%, year over year, primarily aided by the strong performance of Analytics and Engineering, and Applications offerings.
Global Infrastructure Services (“GIS”) revenues came in at $2.15 billion during the fiscal second quarter, down 6.8% year over year, reflecting declines in IT Outsourcing, Business Process Servicesand Modern Workplace. However, growth in Cloud and Security was a positive.
The adjusted EBIT margin was 8.6%, expanding 240 basis points (bps) year over year and 60 bps, sequentially. Margins were primarily supported by the company’s ongoing cost-optimization initiatives under which it is focusing on four cost levers — contractor conversion, scaling its GIDCs,real estate and automation through Platform X.
Balance Sheet and Other Financial Metrics
The company exited the fiscal second quarter with $2.70 billion in cash and cash equivalents compared with the $2.46 billion witnessed in the previous quarter. The long-term debt balance (net of current maturities) decreased to $4.36 billion as of Jun 30 from $4.12 billion as of Jun 30, 2021.
During the reported quarter, the company recorded operating and adjusted free cash outflows of $563 million and $404 million, respectively. In the first-half of fiscal 2022, the company generated operating and adjusted free cash outflows of $534 million and $100 million, respectively.
Outlook
For the third quarter of fiscal 2022, the company anticipates revenues to lie between $4.08 billion and $4.13 billion. The adjusted EBIT margin is expected in the range of 8.6-8.9%. DXC projects adjusted earnings per share in the band of 88-93 cents.
For fiscal 2022, the company lowered its revenue guidance range to $16.4-$16.6 billion from $16.6-$16.8 billion. However, it raised the adjusted earnings outlook to $3.52-$3.72 per share from $3.45-$3.65 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, DXC Technology Company. has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, DXC Technology Company. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is DXC Technology Company. (DXC) Down 9.7% Since Last Earnings Report?
It has been about a month since the last earnings report for DXC Technology Company. (DXC - Free Report) . Shares have lost about 9.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is DXC Technology Company. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
DXC Technology’s Q2 Earnings Top, Revenues Miss Estimates
DXC reported second-quarter fiscal 2022 non-GAAP earnings of 90 cents per share, beating the Zacks Consensus Estimate of 84 cents. The bottom line also surged approximately 41% from the prior-year quarter’s earnings of 64 cents per share, mainly on expanding margins and lower interest expenses and tax rate, which more than offset the negative impact of reduced revenues.
Revenues of $4.03 billion missed the consensus mark of $4.12 billion and declined 11.6% year over year. The unfavorable year-over-year comparison might be due to the spin-off and sale of its U.S. State and Local Health and Human Services business to Veritas in October 2020, as well as the sale of the healthcare software business to Dedalus Group in April 2021. Also, a negative impact of $59 million from unfavorable exchange rate hurt quarterly revenue growth.
Quarter in Detail
Segment wise, revenues from Global Business Services (“GBS”) slid 16.5% on a year-over-year basis to $1.87 billion. The HHS business’ divestiture last October affected this segment’s top line. On an organic basis, the division’s revenues increased 3.4%, year over year, primarily aided by the strong performance of Analytics and Engineering, and Applications offerings.
Global Infrastructure Services (“GIS”) revenues came in at $2.15 billion during the fiscal second quarter, down 6.8% year over year, reflecting declines in IT Outsourcing, Business Process Servicesand Modern Workplace. However, growth in Cloud and Security was a positive.
The adjusted EBIT margin was 8.6%, expanding 240 basis points (bps) year over year and 60 bps, sequentially. Margins were primarily supported by the company’s ongoing cost-optimization initiatives under which it is focusing on four cost levers — contractor conversion, scaling its GIDCs,real estate and automation through Platform X.
Balance Sheet and Other Financial Metrics
The company exited the fiscal second quarter with $2.70 billion in cash and cash equivalents compared with the $2.46 billion witnessed in the previous quarter. The long-term debt balance (net of current maturities) decreased to $4.36 billion as of Jun 30 from $4.12 billion as of Jun 30, 2021.
During the reported quarter, the company recorded operating and adjusted free cash outflows of $563 million and $404 million, respectively. In the first-half of fiscal 2022, the company generated operating and adjusted free cash outflows of $534 million and $100 million, respectively.
Outlook
For the third quarter of fiscal 2022, the company anticipates revenues to lie between $4.08 billion and $4.13 billion. The adjusted EBIT margin is expected in the range of 8.6-8.9%. DXC projects adjusted earnings per share in the band of 88-93 cents.
For fiscal 2022, the company lowered its revenue guidance range to $16.4-$16.6 billion from $16.6-$16.8 billion. However, it raised the adjusted earnings outlook to $3.52-$3.72 per share from $3.45-$3.65 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, DXC Technology Company. has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, DXC Technology Company. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.