Computer Sciences' (CSC) Well Positioned for an IT Boom - Barron's
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Computer Sciences Corp. (NYSE: CSC) may finally be poised to post better earnings after a organizational reshuffling in 2007, according to a Barron's article published today.
The company boasts that about 50% of its annual revenues come from governmental organizations worldwide, including the U.S. DoD and CIA, as well as Britain's National Health Services.
CSC is expected to post an EPS of $1.23 on revs of $4.03 billion for Q309. The EPS estimate is an increase of about 17% above the estimate for Q308.
An analyst at Barclays capital states that most IT deals going forward will be more mid-sized, not big-ticket discretionary. He also says that CSC is still undervalued, and for good reason. Shares of the IT giant are trading at 10.4x FY10 EPS estimate of $4.97, below IBM (NYSE: IBM) at 11x FY10 EPS of $11.12 and Accenture's (NYSE: ACN) 14.6x FY10 EPS of $2.73. CSC also has a historical multiple of 16x.
The company operates with three separate entities: public sector, managed services, and business services.
The public sector is the unit that works with federal-government agencies. It generates about 40% of revs for the year, and is expected to drive much of future growth.
The next area is managed services. The entity handles the outsourcing contracts for global businesses and is CSC's major competitor to IBM and ACN. Though this segment also contributes 40% to revs, it is more of a slow-growth area.
The business service deals with clients that have industry-specific needs. Industries can vary from financial services, to chemical production, and health care, among others. This unit provides the final 20% to revenues.
CSC has been on a roller coaster ride since 2000, reaching high's of $90/share, to a recent low of $24.41 in March of 2009. Much of the unease can be attributed to a recent financial statement restatement that occurred in 2007, forcing that organizational change mentioned earlier.
Current CFO Michael Mancuso came over from General Electric (NYSE: GE) and General Dynamics (NYSE: GD) in late 2008. His initiatives included tightening expense controls, revised contracts so that work will stop if a client fails to pay, and increased credit checks on potential clients.
Mancuso sees revs of about $20 billion by 2013, and operating margins to increase from 8.6% to 10.1%.
Analysts see CSC not making spectacular gains in the near term, but a rather gradual climb up at a steady pace. This echoes Mancuso's estimates of 38 basis point's of margin growth per year. The analysts believe that this is one of the cheapest stocks to buy in order to take advantage of the IT boom.
CSC may also be able to gain more health-care contracts with their proven track record with Britain's NHS. They also administer health-care programs for the Danes and the Dutch.
The company boasts that about 50% of its annual revenues come from governmental organizations worldwide, including the U.S. DoD and CIA, as well as Britain's National Health Services.
CSC is expected to post an EPS of $1.23 on revs of $4.03 billion for Q309. The EPS estimate is an increase of about 17% above the estimate for Q308.
An analyst at Barclays capital states that most IT deals going forward will be more mid-sized, not big-ticket discretionary. He also says that CSC is still undervalued, and for good reason. Shares of the IT giant are trading at 10.4x FY10 EPS estimate of $4.97, below IBM (NYSE: IBM) at 11x FY10 EPS of $11.12 and Accenture's (NYSE: ACN) 14.6x FY10 EPS of $2.73. CSC also has a historical multiple of 16x.
The company operates with three separate entities: public sector, managed services, and business services.
The public sector is the unit that works with federal-government agencies. It generates about 40% of revs for the year, and is expected to drive much of future growth.
The next area is managed services. The entity handles the outsourcing contracts for global businesses and is CSC's major competitor to IBM and ACN. Though this segment also contributes 40% to revs, it is more of a slow-growth area.
The business service deals with clients that have industry-specific needs. Industries can vary from financial services, to chemical production, and health care, among others. This unit provides the final 20% to revenues.
CSC has been on a roller coaster ride since 2000, reaching high's of $90/share, to a recent low of $24.41 in March of 2009. Much of the unease can be attributed to a recent financial statement restatement that occurred in 2007, forcing that organizational change mentioned earlier.
Current CFO Michael Mancuso came over from General Electric (NYSE: GE) and General Dynamics (NYSE: GD) in late 2008. His initiatives included tightening expense controls, revised contracts so that work will stop if a client fails to pay, and increased credit checks on potential clients.
Mancuso sees revs of about $20 billion by 2013, and operating margins to increase from 8.6% to 10.1%.
Analysts see CSC not making spectacular gains in the near term, but a rather gradual climb up at a steady pace. This echoes Mancuso's estimates of 38 basis point's of margin growth per year. The analysts believe that this is one of the cheapest stocks to buy in order to take advantage of the IT boom.
CSC may also be able to gain more health-care contracts with their proven track record with Britain's NHS. They also administer health-care programs for the Danes and the Dutch.
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