DXC Technology


DXC

is scheduled to report third-quarter fiscal 2022 results on Feb 2.

For the third quarter of fiscal 2022, the company anticipates revenues between $4.08 billion and $4.13 billion. The Zacks Consensus Estimate for third-quarter revenues stands at $4.10 billion, indicating a year-over-year decline of 4.4%.

DXC anticipates non-GAAP earnings to come in at 88-93 cents per share. The consensus mark for earnings is pegged at 92 cents per share, suggesting a 9.5% year-over-year increase.

The company’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 20.1%.

Factors to Note

DXC’s fiscal third-quarter performance is likely to have benefited from strength in the digital business and partnerships that are helping it expand in the cloud computing space. Increased information technology (“IT”) spending is anticipated to have contributed to the top line in the quarter to be reported.

DXC’s fiscal third-quarter top line is, however, likely to reflect the negative impact of price concessions, previous business terminations, and runoffs. Apart from this, a weak traditional business might have weighed on the to-be-reported quarter’s performance. Nevertheless, sequential revenue stabilization is expected to have continued.

Margins are anticipated to have witnessed sequential expansion during the period in discussion, primarily driven by the company’s cost-saving initiatives and lower interest expenses. DXC projects adjusted EBIT margin in the range of 8.6-8.9% in the third quarter.

The company anticipates reporting a book-to-bill of more than 1.0 during the third quarter. DXC is likely to witness an approximately $33 million reduction in interest expenses chiefly driven by the refinancing of high rate bonds.

However, a $60 million non-recurring cash payment to legacy vendor and a $90 million non-recurring cash payment related to COVID relief legislation might have weighed on DXC’s free cash flow in the third quarter of fiscal 2022.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for DXC this season. The combination of a positive


Earnings ESP


and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

DXC currently has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our


Earnings ESP Filter


.

Stocks With Favorable Combinations

Per our model,

General Motors


GM

,

Advanced Micro Devices


AMD

and

Starbucks


SBUX

have the right combination of elements to post an earnings beat in their upcoming releases.

General Motors has a Zacks Rank #1 and an Earnings ESP of +8.60%. The company is scheduled to report fourth-quarter 2021 results on Feb 1. Its earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 46.5%. You can see


the complete list of today’s Zacks #1 Rank stocks here


.

The Zacks Consensus Estimate for the fourth-quarter earnings of General Motors is pegged at $1.15 per share, suggesting a year-over-year decline of 40.4%. The consensus mark for revenues stands at $29.22 billion, indicating a year-over-year decline of 22.1%.

AMD is slated to report fourth-quarter 2021 results on Feb 1. The stock has a Zacks Rank #2 and an Earnings ESP of +3.47%. Its earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 14%.

The Zacks Consensus Estimate for AMD’s quarterly earnings stands at 75 cents per share, suggesting a year-over-year improvement of 44.2%. Its quarterly revenues are estimated to improve 39.4% year over year to $4.52 billion.

Starbucks has a Zacks Rank #3 and an Earnings ESP of +2.22%. The company is scheduled to report first-quarter fiscal 2022 results on Feb 1. Its earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 15.3%.

The Zacks Consensus Estimate for Starbucks’ first-quarter earnings is pegged at 80 cents per share, suggesting year-over-year growth of 31.2%. The consensus mark for revenues stands at $7.99 billion, indicating a year-over-year improvement of 18.4%.

Stay on top of upcoming earnings announcements with the Zacks


Earnings Calendar


.

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