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DXC Technology Company (DXC - Free Report) shares gained 7% after market close on Aug 8, 2024, as it reported better-than-expected results for the first quarter of fiscal 2025. The IT services and consulting company posted first-quarter non-GAAP earnings of 74 cents per share, which beat the Zacks Consensus Estimate of 57 cents.
The bottom line increased 17% from the prior-year quarter’s earnings of 63 cents per share. The year-over-year improvement was primarily due to increased gross margin generated from the disciplined cost management within the Global Infrastructure Services (GIS) segment and a lower number of outstanding shares.
DXC reported revenues of $3.24 billion, which surpassed the consensus mark of $3.14 billion. However, the top line declined 6% year over year, mainly due to a decrease in revenues across the GIS segment’s Modern Workplace and Cloud Infrastructure & ITO businesses. Additionally, we believe that the top line could have been negatively impacted by a slowdown in client expenditure in the current uncertain macroeconomic environment.
DXC Technology Company. Price, Consensus and EPS Surprise
DXC’s bookings in the fiscal first quarter were $2.49 billion, reflecting a book-to-bill ratio of 0.77. The trailing 12-month book-to-bill ratio for the company was 0.88.
Segment-wise, revenues from Global Business Services declined 2% on a year-over-year basis to $1.67 billion. On an organic basis, the division’s revenues increased 1% year over year. The organic growth in revenues was mainly driven by traction in insurance software and BPS business.
GIS revenues were $1.56 billion in the fiscal first quarter, down 10% year over year. On an organic basis, the division’s revenues decreased 9% year over year. The GIS division witnessed revenue declines across all three business offerings — Cloud Infrastructure & ITO, Modern Workplace and Security.
The company’s non-GAAP gross profit declined 2.3% to $710 million from $727 million reported in the year-ago quarter due to lower revenues. However, the non-GAAP gross margin increased 80 bps on a year-over-year basis to 21.9%
DXC’s non-GAAP operating income declined to $222 million in the fiscal first quarter from $224 million in the year-ago quarter. The adjusted operating margin expanded 40 bps to 6.9%.
Balance Sheet & Cash Flow
DXC exited the fiscal first quarter with $1.32 billion in cash and cash equivalents compared with $1.22 billion in the previous quarter. The long-term debt balance (net of current maturities) was $3.76 billion as of Jun 30, 2024, down from $3.82 billion as of Mar 31, 2024.
In the fiscal first quarter, DXC generated an operating cash flow of $238 million and a free cash flow of $45 million.
FY25 Guidance
For the fiscal second quarter, the company anticipates revenues between $3.19 billion and $3.22 billion. The adjusted EBIT margin is expected in the ban of 6.5-7.0%. DXC projects adjusted earnings per share between 70 cents and 75 cents for the fiscal second quarter. The Zacks Consensus Estimate for revenues and earnings is pegged at $3.18 billion and 67 cents per share, respectively.
For fiscal 2025, DXC now expects revenues between $12.74 billion and $13.02 billion compared with the previous guidance of $12.67-$12.95 billion. The company now projects the adjusted EBIT margin in the range of 6.5-7.0%, up from the previous guidance of 6-7%. It now forecasts adjusted EPS between $2.75 and $3.00 compared with the previous guidance of $2.50-$3. The consensus mark for revenues and earnings per share is pegged at $12.79 billion and $2.73, respectively.
Zacks Rank & Stocks to Consider
DXC currently carries a Zacks Rank #3 (Hold). Shares of DXC have lost 19.8% year to date (YTD).
The Zacks Consensus Estimate for Arista Networks’ fiscal 2024 earnings has been revised upward by 32 cents to $8.24 per share in the past 30 days, suggesting year-over-year growth of 16%. The long-term estimated earnings growth rate for the stock is 17.2%. The stock has gained 42.1% YTD.
The consensus mark for Twilio’s 2024 earnings has been revised upward by 10 cents to $3.22 per share over the past seven days, indicating a 31.4% increase from 2023. It has a long-term earnings growth expectation of 32.7%. The stock has plunged 20.1% YTD.
The Zacks Consensus Estimate for Datadog’s 2024 earnings has remained unchanged at $1.54 in the past 60 days, indicating an increase of 16.7% on a year-over-year basis. The long-term estimated earnings growth rate for the stock is 9.6%. Shares of DDOG have plunged 6% YTD.
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DXC Technology (DXC) Rises 7% as Q1 Earnings & Revenues Beat
DXC Technology Company (DXC - Free Report) shares gained 7% after market close on Aug 8, 2024, as it reported better-than-expected results for the first quarter of fiscal 2025. The IT services and consulting company posted first-quarter non-GAAP earnings of 74 cents per share, which beat the Zacks Consensus Estimate of 57 cents.
The bottom line increased 17% from the prior-year quarter’s earnings of 63 cents per share. The year-over-year improvement was primarily due to increased gross margin generated from the disciplined cost management within the Global Infrastructure Services (GIS) segment and a lower number of outstanding shares.
DXC reported revenues of $3.24 billion, which surpassed the consensus mark of $3.14 billion. However, the top line declined 6% year over year, mainly due to a decrease in revenues across the GIS segment’s Modern Workplace and Cloud Infrastructure & ITO businesses. Additionally, we believe that the top line could have been negatively impacted by a slowdown in client expenditure in the current uncertain macroeconomic environment.
DXC Technology Company. Price, Consensus and EPS Surprise
DXC Technology Company. price-consensus-eps-surprise-chart | DXC Technology Company. Quote
Q1 Details
DXC’s bookings in the fiscal first quarter were $2.49 billion, reflecting a book-to-bill ratio of 0.77. The trailing 12-month book-to-bill ratio for the company was 0.88.
Segment-wise, revenues from Global Business Services declined 2% on a year-over-year basis to $1.67 billion. On an organic basis, the division’s revenues increased 1% year over year. The organic growth in revenues was mainly driven by traction in insurance software and BPS business.
GIS revenues were $1.56 billion in the fiscal first quarter, down 10% year over year. On an organic basis, the division’s revenues decreased 9% year over year. The GIS division witnessed revenue declines across all three business offerings — Cloud Infrastructure & ITO, Modern Workplace and Security.
The company’s non-GAAP gross profit declined 2.3% to $710 million from $727 million reported in the year-ago quarter due to lower revenues. However, the non-GAAP gross margin increased 80 bps on a year-over-year basis to 21.9%
DXC’s non-GAAP operating income declined to $222 million in the fiscal first quarter from $224 million in the year-ago quarter. The adjusted operating margin expanded 40 bps to 6.9%.
Balance Sheet & Cash Flow
DXC exited the fiscal first quarter with $1.32 billion in cash and cash equivalents compared with $1.22 billion in the previous quarter. The long-term debt balance (net of current maturities) was $3.76 billion as of Jun 30, 2024, down from $3.82 billion as of Mar 31, 2024.
In the fiscal first quarter, DXC generated an operating cash flow of $238 million and a free cash flow of $45 million.
FY25 Guidance
For the fiscal second quarter, the company anticipates revenues between $3.19 billion and $3.22 billion. The adjusted EBIT margin is expected in the ban of 6.5-7.0%. DXC projects adjusted earnings per share between 70 cents and 75 cents for the fiscal second quarter. The Zacks Consensus Estimate for revenues and earnings is pegged at $3.18 billion and 67 cents per share, respectively.
For fiscal 2025, DXC now expects revenues between $12.74 billion and $13.02 billion compared with the previous guidance of $12.67-$12.95 billion. The company now projects the adjusted EBIT margin in the range of 6.5-7.0%, up from the previous guidance of 6-7%. It now forecasts adjusted EPS between $2.75 and $3.00 compared with the previous guidance of $2.50-$3. The consensus mark for revenues and earnings per share is pegged at $12.79 billion and $2.73, respectively.
Zacks Rank & Stocks to Consider
DXC currently carries a Zacks Rank #3 (Hold). Shares of DXC have lost 19.8% year to date (YTD).
Some better-ranked stocks in the broader technology sector are Arista Networks (ANET - Free Report) , Twilio (TWLO - Free Report) and Datadog (DDOG - Free Report) . While ANET sports a Zacks Rank #1 (Strong Buy), TWLO and DDOG carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Arista Networks’ fiscal 2024 earnings has been revised upward by 32 cents to $8.24 per share in the past 30 days, suggesting year-over-year growth of 16%. The long-term estimated earnings growth rate for the stock is 17.2%. The stock has gained 42.1% YTD.
The consensus mark for Twilio’s 2024 earnings has been revised upward by 10 cents to $3.22 per share over the past seven days, indicating a 31.4% increase from 2023. It has a long-term earnings growth expectation of 32.7%. The stock has plunged 20.1% YTD.
The Zacks Consensus Estimate for Datadog’s 2024 earnings has remained unchanged at $1.54 in the past 60 days, indicating an increase of 16.7% on a year-over-year basis. The long-term estimated earnings growth rate for the stock is 9.6%. Shares of DDOG have plunged 6% YTD.