BMC Bmc Software, Inc. (MM)

Computer Sciences Corporation (CSC) reported first-quarter 2014 earnings per share of 91 cents, well ahead of the Zacks Consensus Estimate of 64 cents. The company has successfully controlled its cost and expand its margins.

Revenues

The company reported first-quarter revenues of $3.26 billion, down 10.3% from $3.63 billion year over year. Weak performances across all business segments resulted in the decline in revenues.

Segment wise, NPS sector’s revenues were $1.05 billion in the quarter or approximately 32.3% of the total company revenue. The segment’s revenues declined 11.0% on a year-over-year basis. The company is witnessing a shift in customer demand which has led to a weakness in the NPS segment.

Global Business services Sector revenues stood at $1.08 billion, which is around 33.2% of the total revenue generated by the company and is down 15.3% compared to the year-ago quarter. The revenues from this segment took a beating, after adjusting for the $79.0 million of revenues from the divested IT staffing business. Moreover, the shift toward high-value offering and leading edge solutions affected the consulting business included in this segment.

North America Public Sector revenues were $1.05 billion in the quarter, representing 32.3% of the total company revenue. Segment revenues declined 11.0% on a year-over-year basis. The company witnessed reductions in professional services due to sequestration and continues to witness delays in contract wins.

Operating Results

The company posted income from continuing operation of $304.0 million, up 108.2% from $146.0 million reported in the year-ago quarter. This hike can be mainly attributed to a more than 100.0% jump in operating income. The operating margin for the quarter was 9.3% compared with 4.0% in the year-ago quarter. The improvement was mainly due to the benefits received from better contract performance and tight cost control.

Net income from continuing operation available to Computer Sciences Corporation shareholders was $141.0 million or 91 cents, compared to $17.0 million or 10 cents per share in the year-ago period.

Balance Sheet & Cash Back to Shareholders

The company exited the quarter with $1.93 billion in cash and cash equivalents, down from $2.05 billion reported in the previous quarter. Long-term debt balance was $2.46 billion, slightly down from $2.50 billion. Moreover, the company generated $213 million of cash from operating activity, up from $41.0 million in the previous quarter.

During the first quarter, Computer Sciences Corporation returned $157.0 million to shareholders consisting of $30.0 million in common stock dividends and $127.0 million worth of share repurchases.

Our Take

Computer Sciences Corporation is one of the leading players in the information technology (IT) services industry. The company reported mixed first-quarter 2013 results, with the bottom line increasing year over year and ahead of the Zacks Consensus Estimate but revenues declining on a year-over-year basis. The company’s consulting business took a beating. Moreover, the company is returning cash to its shareholders in the form of dividend and share repurchase.

However, the company is facing stiff competition from the likes of BMC Inc. (BMC) and a challenging macroeconomic condition in Europe. Delay in the government’s order renewal process might add to the woes.

Computer Sciences holds a Zacks Rank #4 (Sell).

Investors can also consider the below-mentioned stocks –

Carbonite Inc. (CARB) carrying a Zacks Rank #1 (Strong Buy)and NCI Inc. (NCIT) carrying a Zacks Rank #2(Buy).

 
BMC SOFTWARE (BMC): Free Stock Analysis Report
 
CARBONITE INC (CARB): Free Stock Analysis Report
 
COMP SCIENCE (CSC): Free Stock Analysis Report
 
NCI INC-CL A (NCIT): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research