EDS Offers Up Texas-Size Forecast

Shares are jumping in premarket trading as the company lifts its guidance.
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EDS

(EDS)

expects to report a second-quarter profit well in excess of its previous guidance and plans to raise its earnings-per-share forecast for the full year, the company said Friday.

The Plano, Texas, computer outsourcing company said in a press release that it expects to report earnings of $26 million, or 5 cents a share, and a profit before items of $45 million, or 9 cents a share, for the quarter.

Earnings before items exclude costs of 6 cents for stock-option expensing and the issuance of performance-based restricted stock units. This measure also excludes a gain of 2 cents a share from prior-year divestitures, discontinued operations and the reversal of a portion of previously recognized restructuring expenses.

Shares of EDS were jumping in premarket trading, adding $1.45, or 7%, to $21.20.

Both actual earnings and the profit before items will include an asset-impairment charge of 5 cents a share associated with a commercial contract disclosed in June. At that time, the company held assets of $166 million in support of the contract and said a significant portion or all of the assets might be impaired.

EDS now believes earnings before items for the full year will be 10 cents better than anticipated, and the company offered a new range of 50 cents to 60 cents a share. Second-quarter revenue should be $5.2 billion, at the high end of its previous guidance. EDS still sees total contract signings with a value of around $20 billion for the full year.

The company also said it will repeat its 2005 and 2006 forecasts for free cash flow. EDS will issue its second-quarter earnings Aug. 3 after the market closes.

Thomson First Call has a consensus estimate for the second quarter of a loss of 5 cents a share. For the full year, analysts expect earnings of 42 cents.