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Why Is DXC Technology Company. (DXC) Down 0.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for DXC Technology Company. (DXC). Shares have lost about 0.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is DXC Technology Company. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

DXC Technology Tops Q4 Earnings & Revenue Estimates

DXC reported fourth-quarter fiscal 2021 non-GAAP earnings of 74 cents per share, which beat the Zacks Consensus Estimate by 5.71%. The bottom line, however, declined from the prior-year quarter’s $1.20 per share.

Revenues of $4.39 billion surpassed the consensus mark of $4.29 billion. However, the top line fell 8.9% year over year. Spin-off of its U.S. State and Local Health and Human Services business to Veritas as well as its healthcare software business to Dedalus Group in 2020 led to the year-over-year decline.

During fiscal 2021, DXC recorded revenues of $17.73 billion, down 9.4% year on year.

Quarter in Detail

Segment-wise, revenues from Global Business Services (“GBS”) slid 13.4% on a year-over-year basis to $2 billion. Divestiture of the HHS business in October last year affected revenues from this segment. However, growth in Analytics and Engineering, Applications, and Business Process Solutions was a breather.

Global Infrastructure Services (“GIS”) revenues during the fiscal third quarter came in at $2.39 billion, down 4.8% year over year, reflecting declines in Cloud and Security, and Modern Workplace. However, growth in IT Outsourcing was a positive.

Adjusted EBIT margin was 7.5%, advancing 50 basis points sequentially.

Balance Sheet and Other Financial Metrics

The company exited the fiscal third quarter with $2.97 billion in cash and cash equivalents compared with the $3.92 billion witnessed in the previous quarter. Long-term debt balance (net of current maturities) decreased to $4.35 billion as of Mar 31 from $5.44 billion as of Dec 31.

During the reported quarter, the company recorded operating and adjusted free cash outflows of $280 million and $443 million, respectively. During fiscal 2021, the company generated operating cash flow of $124 million and adjusted free cash outflow of $652 million.

Outlook

For the first quarter of fiscal 2022, the company anticipates revenues between $4.08 billion and $4.13 billion. Adjusted EBIT margin is expected in the range of 7.4-7.8%. DXC projects adjusted earnings per share in the band of 72-76 cents.

For the full-year fiscal 2022, DXC expects a revenue range of $16.6 to $16.8 billion, and adjusted earnings of $3.45-$3.65 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, DXC Technology Company. has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, DXC Technology Company. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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