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DXC Technology (DXC) to Post Q3 Earnings: What's in Store?

Zacks Equity Research

DXC Technology Company DXC is set to report third-quarter fiscal 2020 results on Feb 6.

For the quarter, the Zacks Consensus Estimate for revenues stands at $4.91 billion, indicating a 5.26% decline from the year-ago quarter’s reported figure. The consensus mark for earnings is $1.1 per share, suggesting a 50.67% decline.

The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average positive surprise being 3.17%.

Let’s see how things are shaping up for the upcoming announcement.

DXC Technology Company. Price and EPS Surprise

DXC Technology Company. Price and EPS Surprise

DXC Technology Company. price-eps-surprise | DXC Technology Company. Quote

Factors at Play

DXC Technology’s fiscal third-quarter earnings are likely to have benefited from continued strength in the Digital business, driven by growth in enterprise and cloud apps, cloud infrastructure, and digital workplace offerings. Further, the Luxoft business is likely to have been a key driver.

The company’s efforts in the autonomous and connected vehicles market are expected to have positively impacted the quarterly results.

Further, DXC Technology’s joint digital transformation practice with Microsoft’s MSFT cloud division Azure and partnership with Alphabet’s GOOGL Google Cloud are likely to get positively reflected in the upcoming results.

Moreover, the Global Business Services segment is expected to be a key top-line driver. The Zacks Consensus Estimate for revenues from this segment stands at $2.34 billion, indicating 7.65% year-over-year growth.

However, currency headwinds and a weak traditional business are likely to have negatively impacted the top line in the fiscal third quarter.

Increased investments in digital hiring for the expansion of digital transformation capabilities are likely to have weighed on margins.

Moreover, certain customers are putting revenue opportunities on hold due to delivery execution issues. This might have hurt the top line in the quarter under review.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for DXC Technology this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

DXC Technology has an Earnings ESP of 0.00% and a Zacks Rank #3.

A Stock to Consider

Here is a stock you may consider, as our model shows that it has the right combination of elements to beat on earnings this season:

CDW Corporation CDW has an Earnings ESP of +2.34% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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