Shares of CA Inc. (CA) hit a new 52-week high of $33.14 on Nov 22, eventually closing at $33.13. The closing share price represents a remarkable one-year return of 49.7% and a year-to-date return of 45.7%.
Investors remain upbeat as CA’s cloud expansion and restructuring initiatives remain on track. A decent renewal rate, modest cash position and share repurchase activities also appear encouraging. The company’s endeavor to return cash to its investors in the form of dividend payments also boosts investors’ confidence.
Apart from this, bookings growth remains robust, supported by both North American and International bookings. The company is also witnessing an increase in license wins.
CA is gaining traction in the Mainframe Solutions, and Services segments. In the last reported quarter, CA’s mainframe revenues were aided by higher sales of new products and mainframe capacity while Services revenues increased due to higher professional services engagements.
This also provided some cushion to the top line, which was down 1.04% on a year-over-year basis. The dismal performance from the company’s Enterprise solution segment primarily led to the revenue decline.
Nonetheless, CA’s broad product range is expected to attract customers across sectors, lending stability to the business model. Moreover, CA’s products and services cater to the demand of emerging IT enterprises for affordable and quick services and also enable them to reduce operating costs.
Additionally, its associations with International Business Machines (IBM) and other tech companies should yield positives results in the long term. However, increasing competition from the likes of Hewlett-Packard Company (HPQ) and Oracle Corporation (ORCL) coupled with the European exposure remain concerns. A tepid IT spending environment is another factor that could impact CA’s results, going forward.
Currently, CA has a Zacks Rank #3 (Hold).
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