Why DXC Technology Company. (DXC) down 9.7% since last earnings report?
IIt’s been about a month since DXC Technology Company’s last earnings report. (DXC). Stocks lost around 9.7% during that time, underperforming the S&P 500.
Will the recent negative trend continue until its next results release, or is it DXC Technology Company. due for an escape? Before we dive into how investors and analysts have reacted in recent times, let’s take a quick look at his latest earnings report to better understand the important catalysts.
Top earnings of DXC Technology in the second quarter, revenue not in line with estimates
DXC reported non-GAAP second quarter FY2022 earnings of 90 cents per share, beating Zacks’ consensus estimate of 84 cents. Net income also increased by approximately 41% from earnings of 64 cents per share in the prior year quarter, mainly due to higher margins and lower interest charges and lower rate. taxation, which more than offset the negative impact of the drop in income.
Revenue of $ 4.03 billion missed the consensus mark of $ 4.12 billion and was down 11.6% year-over-year. The unfavorable year-over-year comparison could be due to the split and sale of its U.S. and local health and social services business to Veritas in October 2020, as well as the sale of the health software business at the Dedalus group in April. 2021. In addition, a negative impact of $ 59 million from the unfavorable exchange rate hurt quarterly revenue growth.
Quarter in detail
In segment terms, Global Business Services (âGBSâ) revenues fell 16.5% year-on-year to $ 1.87 billion. The sale of the HHS activity last October affected sales in this segment. On an organic basis, the division’s revenue increased 3.4% year-over-year, primarily driven by strong performance in the analytics and engineering and applications offerings.
Global infrastructure services (“GIS”) revenues reached $ 2.15 billion in the fiscal second quarter, down 6.8% year-over-year, reflecting declines in the IT outsourcing, business process services and the modern workplace. However, the growth of Cloud and Security has been positive.
Adjusted EBIT margin was 8.6%, increasing 240 basis points (bps) year-on-year and 60 bps sequentially. Margins have been mainly supported by the company’s ongoing cost optimization initiatives where it focuses on four cost levers: entrepreneur conversion, scaling of its GIDCs, real estate and automation via the X platform.
Balance sheet and other financial parameters
The company ended the second fiscal quarter with $ 2.70 billion in cash and cash equivalents, up from $ 2.46 billion in the previous quarter. The long-term debt balance (net of current maturities) decreased to $ 4.36 billion as of June 30 from $ 4.12 billion as of June 30, 2021.
During the current quarter, the Company recorded free operating and adjusted 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.
For the third quarter of fiscal 2022, the company forecasts revenues of between $ 4.08 billion and $ 4.13 billion. The adjusted EBIT margin is expected to be between 8.6% and 8.9%. DXC forecasts adjusted earnings per share in the 88 to 93 cent range.
For fiscal 2022, the company lowered its revenue forecast range to $ 16.4-16.6 billion, from $ 16.6 billion to $ 16.8 billion. However, he raised the outlook for adjusted earnings to $ 3.52- $ 3.72 per share from $ 3.45 to $ 3.65 per share.
How have the estimates evolved since?
Over the past month, investors have seen a downward trend in the new estimates.
Currently, DXC Technology Company. has a good growth score of B, a note with the same score on the momentum front. Charting a somewhat similar path, the stock received an A rating on the value side, placing it in the top quintile for this investment strategy.
Overall, the stock has an overall VGM score of A. If you’re not strategy-focused, this score is the one you should be interested in.
The estimates had a general downward trend for the stock, and the magnitude of these revisions was net of zero. Notably, DXC Technology Company. has a Zacks Rank # 2 (Buy). We expect an above-average return on the security over the next few months.
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