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Why Is DXC Technology Company. (DXC) Down 10.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for DXC Technology Company. (DXC - Free Report) . Shares have lost about 10.2% 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 Q3 Earnings in Line, Revenue Miss
DXC reported mixed third-quarter fiscal 2022 results, wherein earnings matched the Zacks Consensus Estimate while revenues missed the same.
The company reported non-GAAP earnings of 92 cents per share for the third quarter, in line with the Zacks Consensus Estimate. The bottom line improved 9.5% from the prior-year quarter’s earnings of 84 cents per share, primarily driven by expanding margins and lower interest expenses and outstanding shares, which more than offset the negative impact of reduced revenues.
DXC reported revenues of $4.09 billion missing the consensus mark of $4.10 billion, and declined 4.6% year over year. Third-quarter revenues were negatively impacted by unfavorable currency exchange rates.
Quarterly Details
DXC’s bookings for the fiscal third quarter were $5 billion, reflecting the book-to-bill ratio of 1.23.
Segment-wise, revenues from Global Business Services (“GBS”) increased 1.3% on a year-over-year basis to $1.95 billion. On an organic basis, the division’s revenues improved 7% year over year. The upside was primarily aided by the strong performance of Analytics and Engineering, and Applications offerings.
Global Infrastructure Services (“GIS”) revenues were $2.14 billion in the fiscal third quarter, down 9.5% year over year. On an organic basis, the division’s revenues decreased 8.3% year over year reflecting improvements in information technology outsourcing (“ITO”) services revenues.
The adjusted EBIT margin was 8.7%, expanding 170 basis points (bps) year over year and 10 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 global innovation and delivery centres, real estate, and automation through Platform X.
Balance Sheet and Cash Flow
DXC exited the fiscal third quarter with $2.92 billion in cash and cash equivalents compared with $2.70 billion witnessed in the previous quarter. The long-term debt balance (net of current maturities) declined to $4.24 billion as of Dec 31, 2021, from $4.36 billion as of Sep 30, 2021.
During the third quarter, DXC recorded operating and adjusted free cash of $696 million and $550 million, respectively. This strong cash flow performance was primarily driven by favorable timing on both payments and receipts in the quarter reported.
In the first nine months of fiscal 2022, the company generated operating and adjusted free cash of $1.23 billion and $650 million, respectively.
During the fiscal third quarter, the company repurchased shares worth $213 million. DXC anticipates self-funded share repurchases worth $1 billion in the next year.
Guidance
For the fourth quarter of fiscal 2022, the company anticipates revenues between $4.11 billion and $4.15 billion. The adjusted EBIT margin is expected in the range of 8.7% to 8.9%. DXC projects adjusted earnings between 98 cents and $1.03 per share.
For fiscal 2022, DXC modified its revenue guidance range to approximately $16.4 billion from $16.4-$16.6 billion predicted previously. It revised the adjusted earnings outlook to $3.64-$3.69 per share from $3.52-$3.72 per share.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, DXC Technology Company. has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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
DXC Technology Company. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is DXC Technology Company. (DXC) Down 10.2% Since Last Earnings Report?
A month has gone by since the last earnings report for DXC Technology Company. (DXC - Free Report) . Shares have lost about 10.2% 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 Q3 Earnings in Line, Revenue Miss
DXC reported mixed third-quarter fiscal 2022 results, wherein earnings matched the Zacks Consensus Estimate while revenues missed the same.
The company reported non-GAAP earnings of 92 cents per share for the third quarter, in line with the Zacks Consensus Estimate. The bottom line improved 9.5% from the prior-year quarter’s earnings of 84 cents per share, primarily driven by expanding margins and lower interest expenses and outstanding shares, which more than offset the negative impact of reduced revenues.
DXC reported revenues of $4.09 billion missing the consensus mark of $4.10 billion, and declined 4.6% year over year. Third-quarter revenues were negatively impacted by unfavorable currency exchange rates.
Quarterly Details
DXC’s bookings for the fiscal third quarter were $5 billion, reflecting the book-to-bill ratio of 1.23.
Segment-wise, revenues from Global Business Services (“GBS”) increased 1.3% on a year-over-year basis to $1.95 billion. On an organic basis, the division’s revenues improved 7% year over year. The upside was primarily aided by the strong performance of Analytics and Engineering, and Applications offerings.
Global Infrastructure Services (“GIS”) revenues were $2.14 billion in the fiscal third quarter, down 9.5% year over year. On an organic basis, the division’s revenues decreased 8.3% year over year reflecting improvements in information technology outsourcing (“ITO”) services revenues.
The adjusted EBIT margin was 8.7%, expanding 170 basis points (bps) year over year and 10 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 global innovation and delivery centres, real estate, and automation through Platform X.
Balance Sheet and Cash Flow
DXC exited the fiscal third quarter with $2.92 billion in cash and cash equivalents compared with $2.70 billion witnessed in the previous quarter. The long-term debt balance (net of current maturities) declined to $4.24 billion as of Dec 31, 2021, from $4.36 billion as of Sep 30, 2021.
During the third quarter, DXC recorded operating and adjusted free cash of $696 million and $550 million, respectively. This strong cash flow performance was primarily driven by favorable timing on both payments and receipts in the quarter reported.
In the first nine months of fiscal 2022, the company generated operating and adjusted free cash of $1.23 billion and $650 million, respectively.
During the fiscal third quarter, the company repurchased shares worth $213 million. DXC anticipates self-funded share repurchases worth $1 billion in the next year.
Guidance
For the fourth quarter of fiscal 2022, the company anticipates revenues between $4.11 billion and $4.15 billion. The adjusted EBIT margin is expected in the range of 8.7% to 8.9%. DXC projects adjusted earnings between 98 cents and $1.03 per share.
For fiscal 2022, DXC modified its revenue guidance range to approximately $16.4 billion from $16.4-$16.6 billion predicted previously. It revised the adjusted earnings outlook to $3.64-$3.69 per share from $3.52-$3.72 per share.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, DXC Technology Company. has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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
DXC Technology Company. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.