Complete Business Solutions, Inc. (Nasdaq: CBSI) hit earnings estimates for its third quarter Monday, but warned net income will decline in the fourth quarter due to a Y2K-induced slowdown.
The company's earnings of 22 cents a share, right on target with First Call's estimate, were also down 8.3 percent compared to third quarter of 1998 .
Shares in the worldwide information technology (IT) consultant closed at 13 13/16 Friday, well below their 52-week high of 34 3/4. The stock took a tumble in June after analysts downgraded the company following a profit warning.
The company said profits had narrowed because of lower revenues from high-margin offshore services during this time of transition from Y2K projects. "We completed Y2K projects ahead of schedule and are now redeploying our offshore teams to respond to the huge demand for applications outsourcing and e-commerce business," said Raj Vattikuti, president and chief executive officer in a company statement. "This has temporarily decreased our growth and margins during the overseas transition which we expect will conclude by Q1 2000."
Revenue for the third quarter increased about 20.8 percent to $119.2 million from $98.7 million in the third quarter of 1998.
Vattikuti said fourth quarter revenue was expected to fall to $111 million to $113 million yielding an EPS of 11 to 13 cents, due to the Y2K-induced industry slowdown. First Call was predicting a profit of 21 cents a share.
But he was bullish about CBSI's outlook for 2000, citing the closure of 577 deals over the quarter, which will yield over $90 million. "Our pipeline for 2000 looks very strong particularly in e-business transformation services and applications outsourcing requirements," he said.
In other earnings news:
Shares in the owner of broadband cable networks closed at 40 7/8 Friday.
Revenue was of $1.53 billion, a 23.2 percent increase from the $1.24 billion reported in the third quarter of 1998. Consolidated operating cash flow, increased 24.3 percent to $463.9 million from the $373.3 million reported in the same period in 1998.
The company's results treat Comcast Cellular Corporation as a discontinued operation for all periods presented due to the sale of Comcast Cellular to SBC Communications, Inc. (NYSE: SBC) in July.
Income from operations before extraordinary items were $60.6 million or 7 cents a share, as compared to income from continuing operations of $723.6 million or 97 cents a share for the three months ended Sept. 30, 1998. The company's report was upbeat on the addition of over 325,000 customers to its digital cable business over the last 12 months, and the growth potential of new initiatives in cable, QVC and its other programming businesses.
Net income for common stockholders was $367.8 million or 49 cents a share for the quarter, which includes a gain from discontinued operations of $355.9 million or 47 cents a share and a loss for extraordinary items of $41.4 million or 5 cents a share.
The company said net income for common stockholders for the 1999 periods is attributable to the effects of the $1.5 billion breakup fee received by the company in May as a result of the termination of the MediaOne merger and to the $355.9 million gain on its sale of Comcast Cellular in July.