EDS ( EDS) could be poised for another crash.

The computer services giant is set to release quarterly results that, some fear, could once again disappoint investors who have been waiting two years for the company to debug its own business model. Indeed, analysts last week were already bracing for the worst.

Cynthia Houlton of RBC Capital Markets predicted on Friday that EDS would likely miss earnings estimates -- delivering a bigger loss than expected -- and then lower both its profit and cash-flow projections for the entire year. She expects the company to post a first-quarter loss of 3 cents a share, 2 cents worse than the consensus estimate, and shave up to a dime off its second-half profit forecast. She also suspects that the company's guidance for cash flow, currently set at $500 million to $600 million, could drop by roughly one-fifth.

Houlton expressed particular concern about EDS' problem contracts, including a huge one with the Navy, and a government investigation into the company's past disclosures. Given the serious challenges ahead, Houlton considers EDS' stock -- down 14 cents to $19.38 on Friday -- very expensive.

"Our price target ($15) is notably below current share price due to continued concern about the weakness in EDS's core business," she wrote. "We continue to encourage investors to take profits on EDS, given its current valuation and further downside to profits and cash flow during the next 12 months."

More Growls

Houlton has company in the bear camp. UBS analyst Adam Frisch -- who detected EDS' problems before most -- has consistently warned his clients away from the big Texas company.

Frisch joined Houlton on Friday in airing concerns about the company's upcoming results in particular. Frisch, too, expects EDS to miss the consensus estimate and slash its cash-flow projections for the year. He believes that EDS will post weak contract bookings and report additional problems with projects that are already in place. Specifically, he warns that the Navy contract could once again jeopardize cash flow -- and possibly trigger big impairments -- while the company's more attractive contract with General Motors ( GM) continues to shrivel.

At worst, Frisch believes EDS could be facing a writedown of 99 cents a share on its Navy business. The company itself has already warned that it could take a "material" charge if it fails to resolve problems associated with the contract.

And Houlton points out that the Navy contract isn't the only one threatening the company right now.

"EDS has invested net assets of $150 million with one commercial contract that has experienced significant delays," she wrote. "The client has indicated it may want to terminate the contract due to EDS being in default. ... If the contract is terminated, material impairment could result."

Frisch, for one, sees a credit downgrade coming. He predicts that Moody's will cut EDS' credit to junk if the company fails to deliver upbeat results on Monday.

Moreover, he warns that any downgrade will only further hamper EDS' ability to compete against its stronger peers.

"As we have previously stated on multiple occasions, we are concerned that enterprises (especially large Fortune 500 types and European customers) will be less likely to outsource critical IT operations to EDS if the company's credit rating is downgraded to sub-investment grade, especially considering that there are numerous other suppliers ... that enjoy 'A' or better credit ratings and can provide similar services at similar prices as EDS," wrote Frisch, who has an $18 price target on EDS' shares.

But "unless first-quarter results surprise to the upside and demonstrate stable to improving fundamentals, we believe a near-term credit rating downgrade to 'junk' status is likely."