Why Computer Sciences' Shares Are Flying High

Updated

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Computer Sciences (NYS: CSC) are enjoying a monster post-earnings pop, which is par for the course for a company that's had double-digit moves for all but one of its earnings reports over the past two years. Today, the stock's 19% rise came on the back of a huge earnings beat, despite a slight decline in quarterly revenue year over year.

So what: Computer Sciences posted $3.85 billion in quarterly revenue, about 3% lower than its prior-year quarter and just under the consensus expectation of $3.88 billion. However, adjusted earnings per share, at $0.83, smashed through the Street's expectations of $0.47. There was a restructuring charge of $0.25 per share contributing to that great result, but even a $0.58 EPS result that removes that charge from the final tally significantly outperforms expectations. Computer Sciences also offered a strong guidance range for 2013, with EPS of $2.30 to $2.50 exceeding consensus estimates of $2.24 even on the low end.


Now what: Although Computer Sciences is not currently profitable, its free cash flow has not dipped below breakeven in years, and the most recently available free cash flow numbers result in a single-digit price-to-free-cash-flow ratio, even after today's surge. It's only after this pop that Computer Sciences has reached a new 52-week high, and it seems likely that further gains are within reach, as long as these optimistic projections hold true.

Want more news and updates? Add Computer Sciences to your Watchlist now.

The article Why Computer Sciences' Shares Are Flying High originally appeared on Fool.com.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more news and insights. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Advertisement