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What Makes DXC Technology (DXC) a Potential Pick Right Now?

Zacks Equity Research

The technology space continues to be investors’ favorite due to its dynamic nature. This field is anticipated to grow faster than before. If you invest right, you can reap the benefits over time. The indicators of a stock’s bullish run include a rise in its share price, strong fundamentals and a continued uptrend in estimates.

Below we have evaluated one technology company that has demonstrated remarkable share price performance so far this year. DXC Technology Company DXC generated high returns for investors in the last one year and has the potential to exceed expectations in the days ahead.

Over the past one year, shares of the company have risen 59.75%, outperforming the Zacks categorized Computers – IT Services industry’s increase of just 14.50%.

Let’s look at the reasons behind DXC Technology’s solid momentum.

Upward Estimate Revisions

In the last 60 days, the Zacks Consensus Estimate for DXC Technology’s fiscal 2018 witnessed upward revisions. The Zacks Consensus Estimate for fiscal 2018 is now pegged at $6.70 per share compared with $3.18 projected 60 days ago.

What’s Driving the Stock?

Computer Sciences Corporation, a fully-owned subsidiary (effective Apr 1) of DXC Technology, recently released fourth-quarter fiscal 2017. 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.

The company reported fourth-quarter fiscal 2017 non-GAAP earnings from continuing operations of $1.15 per share, which surpassed the Zacks Consensus Estimate of 85 cents. Earnings increased on a year-over-year basis.

Revenues were also up 4.5% from the year-ago quarter to $1.889 billion.

The merger with HPE’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.

DXC Technology has been making strategic acquisitions, such as UXC and Xchanging, to strengthen its portfolio, which should drive growth over the long run.

DXC Technology has also delivered positive earnings surprises in the last four quarters with an average beat of 23.56%.

Given the company’s long-term earnings per share growth rate of 8%, a VGM Style Score of 'A' and a Zacks Rank #1 (Strong Buy), we believe that the stock still has much upside left. You can see the complete list of today’s Zacks #1 Rank stocks here.

Keeping these positives in mind, we conclude that DXC Technology is a stock that deserves a place in investors’ portfolio.

Other Key Picks

A few other stocks worth considering in the broader technology sector are Applied Optoelectronics, Inc. AAOI and Applied Materials, Inc. AMAT, both sporting a Zacks Rank #1. Applied Optoelectronics and Applied Materials have expected long-term EPS growth rate of 20% and 16.58%, respectively.

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