Computer Sciences Corporation (CSC) will tentatively report the second-quarter 2015 results on Oct 29. Last quarter, the company posted a positive earnings surprise of 9.57%. Moreover, it is worth noting that Computer Sciences has outperformed the Zacks Consensus Estimate in all the four preceding quarters with an average positive surprise of 11.72%. Let's see how things are shaping up for this announcement.
Factors to Consider
Computer Sciences reported better-than-expected first-quarter results and reiterated the fiscal 2015 outlook. We believe that despite the company’s operating segments remained down on a year-over-year basis, the shift toward high-margin offerings will be beneficial in the long run.
Computer Sciences’ adoption of a cloud-based model and re-engagement of the sales force are expected to boost growth, going forward. We believe that this along with its cost rationalization initiatives will enable margin expansion. The company’s traction in the cloud cyber security service market also bodes well.
Moreover, the company’s continuous share buybacks and dividend payments are expected to support earnings and instill investors’ confidence.
However, competition from companies like CACI International Inc. and Accenture, delays in the government’s order renewal process and constricted federal spending are the near-term headwinds.
Earnings Whispers?
Our proven model does not conclusively show that Computer Sciences will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.01. Hence, the difference is 0.00%.
Zacks Rank: Computer Sciences has a Zacks Rank #3 (Hold). Computer Sciences’ Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Facebook, Inc. (FB), with an Earnings ESP of +6.25% and a Zacks Rank #2 (Buy).
The Walt Disney Company (DIS), with an Earnings ESP of +3.41% and a Zacks Rank #2.
Cirrus Logic (CRUS), with an Earnings ESP of +12.77% and a Zacks Rank #3.
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