Shares of CA Inc. (CA) have generated a return of 10.7% over the last three months. The company also delivered a positive earnings surprise of 5.1% in the last reported quarter.
The price appreciation can be attributed to CA’s broad portfolio that takes care of customer needs by delivering products, services and applications in a fast and effective manner.
Moreover, CA’s products and services also help emerging IT enterprises to improve the affordability and speed of their services. Additionally, CA’s expansions in the cloud computing market remain on track. Per IDC, revenues generated by cloud services will be 10 times more than overall revenue growth in the IT industry. By 2015, cloud services will expectedly generate revenues of $16.7 billion. This presents a significant growth opportunity for CA, going forward.
In addition, the company has made strategic acquisitions to supplement its core business. The company is expected to spend $300 million to $500 million for strategic acquisitions in fiscal 2015 that will further its current plans. CA had signed a definitive agreement with Texas-based enterprise software company, Hyperformix Inc., and integrated the latter’s operations and intellectual properties with its own Virtualization and Automation business. With the acquisition, CA Technologies strengthened its position in virtualization, automation, and assurance in the cloud computing environment.
We are encouraged by CA’s endeavor to return shareholders’ value through continuous share buybacks and dividend payouts. During fiscal 2014, the company repurchased stocks worth $505.0 million and paid approximately $453.0 million as dividends. In the second quarter of fiscal 2015, CA paid $111.0 million as dividends. The company is left with $950 million for further repurchase under the new stock repurchase program initiated in May 2014. These investor-friendly initiatives not only boost earnings but also inspire investors’ confidence and loyalty.
Furthermore, CA has adopted the “go to market” sales strategy. This management technique brings together all the commercial functions including sales, marketing, brand management, pricing and consumer insight, which in turn helps the company to improve its bottom line by integrating the marketing functions to lower costs. Also, CA focuses on IT management, DevOps and Security segments to leverage its product strength and research & development capabilities and counter competition.
Nevertheless, the company faces increased competition from International Business Management (IBM), Oracle (ORCL) and Hewlett Packard (HPQ).
Currently, CA has a Zacks Rank #3 (Hold).
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