Spike in Sales Lifts ACS

The information technology outsourcing company also raises guidance for fiscal 2006.
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Updated from 4:29 p.m. EDT

Affiliated Computer Services

(ACS)

beat fourth-quarter sales by a penny Thursday and raised fiscal 2006 sales guidance.

Shares of ACS climbed 6.3% to $53.80 in recent after-hours trading after closing the regular session up $1.65, or 3.4%, to $50.60.

Under generally accepted accounting principles, the Dallas-based information technology outsourcing company reported net income of $111 million, or 87 cents a share, in the fourth quarter, which ended June 30. That was a penny more than analysts' estimates gathered by Thomson First Call.

A year ago, the company reported net income of $90.3 million, or 68 cents a share, and pro forma net income excluding items of 71 cents a share.

ACS' revenue rose 14% to $1.21 billion from $1.06 billion a year earlier. Excluding acquisitions, fourth-quarter revenue was flat from a year earlier. Analysts were expecting sales of $1.19 billion.

ACS raised its full-year revenue guidance to reflect recent acquisitions and improving commercial business, saying it now expects revenue to grow in excess of 25%, or $5.44 billion.

In April, ACS said it expected revenue growth in excess of 20% and internal revenue growth ranging from the upper-single-digit to midteen percentages.

The company said a record number of new business wins in fiscal 2005 will help accelerate organic growth in 2006. In fiscal 2005, revenue from commercial business increased 30% to $2.18 billion while government business was flat at $2.18.

In the fourth quarter, commercial revenue climbed 37% to $868 million; government revenue fell 4% to $667 million.

While raising sales guidance, ACS reiterated its outlook for earnings at a range of $3.30 to $3.55 a share, including stock-option expense of 5% to 6% dilution and a acquisition-related integration costs of 5 cents to 6 cents a share.

In a postclose conference call, ACS CFO Warren Edwards said the company plans to invest $20 million, or roughly 10 cents a share, to expand its presence in Europe.

Analysts were pegging 2006 sales at $5.26 billion and earnings at $3.40 excluding stock-option expense for fiscal 2006.

ACS, which was required to expense stock options starting July 1, said stock-option expense totaled $9.7 million in the fourth quarter and $35.2 million in fiscal 2005. That's up from $30.6 million in fiscal 2004.

The company said the increase in options stems from growth in the company and its acquisition of

Mellon HR

in May.