DXC Technology (DXC) to Report Q2 Earnings: What to Expect?
DXC Technology DXC is slated to report second-quarter fiscal 2024 results on Nov 1.
For the second quarter of fiscal 2024, the company anticipates revenues between $3.43 billion and $3.46 billion. The Zacks Consensus Estimate for fiscal second-quarter revenues stands at $3.44 billion, indicating a year-over-year decline of 3.4%.
DXC anticipates non-GAAP earnings between 65 cents and 70 cents per share. The consensus mark for earnings is pegged at 68 per share, suggesting a 9.3% year-over-year decrease.
The company’s earnings outpaced estimates twice in the trailing four quarters while matching on one occasion and meeting once, with an average surprise of -1.5%.
Let’s see how things are shaping up for this announcement.
DXC Technology Company. Price and EPS Surprise
DXC Technology Company. price-eps-surprise | DXC Technology Company. Quote
Factors to Consider
DXC’s second-quarter performance is likely to have been negatively impacted by softening IT spending as organizations are pushing back their investments in big and expensive technology products amid the ongoing macroeconomic and geopolitical issues.
Moreover, a weak traditional business is likely to have weighed on the to-be-reported quarter's performance. However, sequential revenue stabilization is expected to have continued.
The negative impacts of the aforementioned factors are likely to have been partially offset by DXC’s strength in the digital business and partnerships, which have been helping it expand in the cloud computing space.
In its first-quarter earnings release, the company expected second-quarter organic revenues to decline in the 4.5-5.5% range considering the challenging macroeconomic environment. Our estimate suggests that DXC’s total organic revenues are likely to have declined 5.2% in the to-be-reported quarter.
The year-over-year expected organic revenue decline is mainly due to an anticipated weak performance at DXC’s Global Infrastructure Services (“GIS”), partially offset by the continued improving performance of the Global Business Services (“GBS”) segment.
During the first-quarter earnings conference call, DXC pointed out that the continued difficult economic environment is negatively impacting resale and projects, most significantly in IT Outsourcing and Modern Workplace areas, which are parts of the GIS segment.
Our estimate for the GIS segment’s second-quarter revenues is pegged at $1.72 billion, indicating a year-over-year decline of 10.1% on an organic basis. Meanwhile, our estimate of $1.72 billion for the GBS segment’s revenues suggests a year-over-year organic decline of 0.1%.
Furthermore, revenue shortfall is likely to have weighed on second-quarter margins. DXC projects the adjusted EBIT margin in the range of 6.5%-7% in the fiscal second quarter.
Additionally, DXC’s cost-saving initiatives and lower interest expenses are likely to have partially offset the negative impact of revenue shortfall on bottom-line results. Apart from the abovementioned factors, a reduction in shares outstanding on the company’s aggressive share repurchase initiative is likely to have boosted the EPS.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for DXC this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.
DXC currently carries a Zacks Rank of #4 (Sell) and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Per our model, Palantir Technologies PLTR, ON Semiconductor ON and Synaptics SYNA have the right combination of elements to post an earnings beat in their upcoming releases.
Palantir carries a Zacks Rank #2 and has an Earnings ESP of +4.35%. The company is scheduled to report third-quarter 2023 results on Nov 2. Its earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing on one occasion, with the average surprise being 2.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Palantir’s third-quarter earnings stands at 6 cents per share, indicating a year-over-year improvement of 500%. It is estimated to report revenues of $555 million, which suggests an increase of approximately 16.1% from the year-ago quarter.
ON carries a Zacks Rank #2 and has an Earnings ESP of +1.00%. The company is scheduled to report third-quarter 2022 results on Oct 30. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 8.7%.
The Zacks Consensus Estimate for ON’s third-quarter earnings is pegged at $1.35 per share, indicating a year-over-year decrease of 6.9%. The consensus mark for revenues stands at $2.15 billion, suggesting a year-over-year decline of 2.1%.
Synaptics is slated to report first-quarter fiscal 2024 results on Nov 9. The company has a Zacks Rank #2 and an Earnings ESP of +3.54% at present. Synaptics’ earnings beat the Zacks Consensus Estimate thrice in the trailing four quarters while missing on one occasion, the average surprise being 3.6%.
The Zacks Consensus Estimate for first-quarter earnings is pegged at 38 cents per share, suggesting a decrease of 89.2% from the year-ago quarter’s earnings of $3.52. Synaptics’ quarterly revenues are estimated to decline 48.2% year over year to $232 million.
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Synaptics Incorporated (SYNA) : Free Stock Analysis Report
ON Semiconductor Corporation (ON) : Free Stock Analysis Report
DXC Technology Company. (DXC) : Free Stock Analysis Report
Palantir Technologies Inc. (PLTR) : Free Stock Analysis Report
