Computer Sciences edges past targets
After its fourth-quarter report, the technology services company cuts its near-term outlook.
After market close Monday, the technology services provider reported fiscal fourth-quarter earnings of $61.3 million, or 36 cents per share, excluding special charges. First Call's survey of 14 analysts predicted a profit of 35 cents per share for Computer Sciences' quarter ended March 30.
However, First Call originally predicted a fourth-quarter profit of 92 cents per share. That estimate was severely lowered after Computer Sciences' fourth-quarter profit warning in mid-March.
The company expects fiscal first-quarter earnings per share in the high 20-cent range. First Call consensus was calling for a profit of 39 cents per share.
"Some of the conditions that impacted our fourth quarter will linger to some degree into fiscal 2002," said CEO Van B. Honeycutt. "As a result of finalizing our budget for the current fiscal year, we anticipate our results to improve, quarter by quarter, as fiscal 2002 progresses."
The company predicts fiscal 2002 earnings of $2.25 to $2.35 per share, compared with the consensus analyst prediction of $2.31 per share.
Fourth-quarter revenue increased 12.5 percent year over year to $2.9 billion. Analyst consensus predicted fourth-quarter revenue of $2.84 billion.
Commercial revenue increased 13.8 percent year over year to $2.2 billion. U.S. federal government revenue increased 8.6 percent to $707.2 billion.
"While our revenue growth for the fourth quarter was quite solid, our profits were not," Honeycutt said.
Company executives blamed the earnings disappointment on several factors:
• Lower demand for commercial consulting and systems integration services, especially in North America, caused about 40 percent of the earnings decline from the year-ago period, Chief Financial Officer Leon Level said during a conference call with analysts. Computer Sciences earned 84 cents per share in the fourth quarter of the previous fiscal year.
• Disappointing sales of health care software, which boosted Computer Sciences' profit margin. Level blamed about 10 percent of the decline on this area.
• Lower margins on two contracts and cost overruns on some fixed-price projects were responsible for about 20 percent of the shortfall, Level said.
• Higher-interest expenses and lower-than-expected revenue from Internet-related clients, whose problems forced Computer Sciences to write off some receivables, were responsible for the rest of the decline, Level said.