Why Computer Sciences (CSC) Is Up Today

NEW YORK (TheStreet) -- Computer Sciences (CSC) was jumping 10.1% to $60.73 Friday following a third-quarter earnings report that exceeded analyst expectations.

In its third-quarter results the IT company posted earnings of 98 cents a share. Analysts surveyed by Thomson Reuters expected earnings of 84 cents a share in the quarter. Revenue for the quarter decreased 8.7% to $3.23 billion, while analysts predicted revenue of $3.22 billion.

Computer Sciences also raised its fiscal 2014 earnings forecast. The company now expects earnings between $3.80 and $3.90 a share for the year. The previous forecast was for between $3.50 and $3.70 a share. Analysts estimate earnings of$3.68 a share for the year.

TheStreet Ratings team rates COMPUTER SCIENCES CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate COMPUTER SCIENCES CORP (CSC) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 34.78% and other important driving factors, this stock has surged by 32.91% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • COMPUTER SCIENCES CORP has improved earnings per share by 34.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, COMPUTER SCIENCES CORP turned its bottom line around by earning $3.08 versus -$28.31 in the prior year. This year, the market expects an improvement in earnings ($3.69 versus $3.08).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the IT Services industry and the overall market on the basis of return on equity, COMPUTER SCIENCES CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The gross profit margin for COMPUTER SCIENCES CORP is currently lower than what is desirable, coming in at 26.64%. Regardless of CSC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CSC's net profit margin of 6.36% is significantly lower than the industry average.
  • Net operating cash flow has decreased to $270.00 million or 39.18% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: CSC Ratings Report

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