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DXC Technology (DXC) to Report Pre-Merger Q4 Results of CSC

Zacks

DXC Technology Company DXC announced that it will release the fourth-quarter fiscal 2017 results of Computer Sciences Corporation (CSC) on May 25. Notably, DXC Technology is a result of merger between Computer Sciences and Enterprise Services Division of Hewlett Packard Enterprise HPE, which was closed on Apr 1, 2017.

Last quarter, CSC posted a positive earnings surprise of 14.1%. Notably, the stock has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 16.6%.

Let us see how things are shaping up for the company’s last financial announcement.

Factors to Consider


The merger with Hewlett Packard Enterprise company’s Enterprise Services business has opened up new avenues of growth and will help the combined entity to become a leading player in the IT services domain. However, we believe that the benefits of the merger will come over the long run, as CSC’s fiscal fourth-quarter results are likely to bear the effect of the integration of the acquired businesses.

Moreover, costs associated with the merger and other acquisitions, such as UXC and Xchanging, are likely to undermine the company’s bottom-line results in the to-be-reported quarter.

Apart from this, increased competition, delay in government’s order renewal process and constricted federal spending may adversely affect its results in the fiscal fourth quarter.

Nonetheless, the company’s traction in the cloud and partnerships with the likes of HCL, AT&T, VMware and Microsoft MSFT are expected to positively impact its overall fiscal fourth-quarter results.

Earnings Whispers

Note that CSC’s fiscal fourth-quarter estimates have been provided under the newly formed company.

Our proven model does not conclusively show that DXC Technology is will beat the Zacks Consensus Estimate in its upcoming release. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for DXC Technology is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both are pegged at 85 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DXC Technology sports a Zacks Rank #1. Though this increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock to Consider

Here is a stock which, per our model, has the right combination of elements to post an earnings beat this quarter:

Science Applications International Corporation SAIC, with an Earnings ESP of +15.0%, and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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