DXC Technology Company (DXC – Free Report) reported mixed results for the third quarter of fiscal 2023, in which turnover exceeded the Zacks Consensus Estimate, while revenue fell similarly. The company reported third-quarter non-GAAP earnings of 95 cents per share, beating the Zacks Consensus Estimate of 84 cents.
Earnings rose 3.3% from a year earlier earnings of 92 cents per share. The year-over-year improvement was primarily due to lower interest rates and lower share capital, which was partially offset by higher sales and changes in foreign exchange rates.
DXC reported revenue of $3.57 billion, which narrowly missed the consensus estimate of $3.58 billion and was down 12.8% year-over-year. The top line was marred by strong year-over-year estimates related to lower repeat sales, stagnant license sales in the prior year, and lower-than-expected revenue this year.
Quarterly Details
DXC’s third fiscal quarter bookings were $4.78 billion, reflecting a book-to-bill ratio of 1.34. The company’s trailing 12-month book-to-bill ratio was 1.06 at the end of the third quarter of fiscal 2023.
On a year-over-year basis, revenue from Global Business Services fell 10.7% year over year to $1.74 billion. For natural products, the group’s income increased by 0.2% year-on-year. The increase was mainly supported by the strong performance of the Analytics and Engineering offerings, where revenue rose 11.7% on an organic basis.
Global Infrastructure Services revenue was $1.83 billion in the third fiscal quarter, down 14.7% year over year. In natural resources, the sector’s revenue decreased by 7.4% year-on-year. Adjusted EBIT margin was 8.7%, year over year, up 120 bps sequentially.
During its earnings call, DXC said it is making progress toward its goal of cost reductions with $500 million in savings being made through capital improvements. As part of its cost-enhancement initiatives, the company is focusing on four key cost-effectiveness measures – turning over contracts, expanding its global capabilities with delivery centers, real estate and automation through Platform X.
Balance Sheet and Cash Flow
DXC exited the third fiscal quarter with revenue of $2.09 billion and the same amount of revenue of $2.26 billion witnessed in the previous quarter. Long-term debt (total currently maturing) increased to $3.85 billion as of December 31, 2022 from $3.7 billion as of Sep 30, 2022.
In the third quarter, DXC generated $625 million in cash flow and $463 million in free cash flow. In the first nine months of fiscal 2023, the company generated operating and free cash flow of $1 billion and $468 million, respectively.
In the first three quarters of fiscal 2023, DXC repurchased $325 million in shares, using $600 million under its $1 billion repurchase authorization.
Instructions
The company lowered its revenue guidance for 2023. DXC now estimates revenue in the range of $14.46-$14.47 billion, up from its previous guidance of $14.4-$14.54 billion. It also lowered its adjusted guidance to $3.45-$3.50 per share from the previously forecast $3.45-$3.75 per share.
In the fourth quarter of 2023, the company expects revenue between $3.615 billion and $3.635 billion. The adjusted EBIT margin is expected to be in the range of 8.7%-9.2%. DXC projects adjusted earnings between $1 and $1.05 per share.Zacks Rank & Stocks to Watch
Zacks Rank & Stocks to Consider
Currently, DXC has a Zacks Rank #4 (Sell). Shares of DXC are down 6.3% over the past year.
Some of the best ranked stocks from the technology sector are Opinions of the company Paylocity Holding (PCTY – free report), Concept of the company CDW Corporation (CDW – Free report) and ServiceNow (NOW – Free report). Paylocity sports a Zacks Rank #1 (Strong Buy) at this point, while CDW and ServiceNow each have a Zacks Rank #2 (Buy). You can see A complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Paylocity’s third quarter 2023 earnings was unchanged at $1.38 per share over the past 60 days. For fiscal 2023, earnings estimates were unchanged at $4.05 per share over the past 60 days.
Paylocity’s earnings beat the Zacks Consensus Estimate in each of the past four quarters, the average surprise by 51.2%. PCTY shares are up 5.5% over the next 12 months.
The Zacks Consensus Estimate for CDW’s fourth quarter 2022 earnings was unchanged at $2.45 per share over the past 60 days. For the year 2022, the earnings estimate is unchanged at $9.75 per share in the last 60 days.
CDW’s earnings beat the Zacks Consensus Estimate in the past four quarters, the average surprise by 6.6%. The company’s shares are up 5.2% over the past year.
The Zacks Consensus Estimate for ServiceNow’s first quarter 2023 earnings has been revised south by 4 cents to $2.01 per share in the past seven days. In 2023, earnings estimates rose 19 cents to $9.17 per share in the last seven days.
ServiceNow’s earnings beat the Zacks Consensus Estimate in each of the past four quarters, the average surprise being 6.9%. NOW shares are down 19.2% over the next 12 months.
