DXC Technology (DXC) To Report Q2 Earnings: What's In Store?

DXC Technology (NYSE:DXC) is scheduled to report second-quarter fiscal 2020 results on Nov 11.

For the quarter, the Zacks Consensus Estimate for revenues stands at $4.92 billion, indicating 1.78% decline from the year-ago reported figure. The consensus mark for earnings is $1.44, suggesting a 28.71% decline.

The company beat estimates in each of the trailing four quarters, the average positive surprise being 4.98%.

In the fiscal first quarter, the company reported non-GAAP earnings of $1.74 per share, which surpassed the consensus estimate of $1.71. However, the figure declined from $1.93 reported a year ago.

At $4.89 billion, fiscal first-quarter revenues lagged the prior-year quarter number by 7.4%, and also slipped 4.2% on constant currency basis. However, the metric topped the Zacks Consensus Estimate of $4.87 billion. Headwinds in traditional application services business affected revenues. However, strong demand for digital solutions was an upside.

Key Factors

DXC Technology’s fiscal second quarter earnings are likely to have benefited from strength in the Digital business, driven by growth in enterprise and cloud apps, cloud infrastructure and digital workplace offerings.

Further, the acquisition of Luxoft in the last reported quarter is expected to have been a key driver.

DXC Technology’s joint digital transformation practice with Microsoft’s (NASDAQ:MSFT) cloud division Azure, and partnerships with Alphabet’s (NASDAQ:GOOGL) Google Cloud and Amazon’s (NASDAQ:AMZN) AWS are likely to get positively reflected in the upcoming results.

Rapid adoption of cloud infrastructure in the top 200 or 300 existing clients might have been a tailwind in the fiscal second quarter.

Rise in DXC Technology’s IP offerings are likely to have augmented industry IP and BPS (Business Process Services) revenues. Continued deal wins in analytics and industry IP and BPS are expected to have strengthened bookings in the to-be-reported quarter.

Moreover, the acquisition of Molina might have boosted demand in the U.S. state Medicaid business.

However, currency headwinds are likely to have negatively impacted the top line in the fiscal second quarter.

Ongoing decline in legacy application services are expected to have hurt GBS (Global Business Services) bookings.

Moreover, the company expects delays in cost takeout to affect margins by about 1 point sequentially in the fiscal second quarter.

Increased investments in digital hiring for the expansion of digital transformation capabilities are likely to have weighed on margins.

Moreover, DXC Technology is accelerating the program of helping customers make upfront savings to procure a greater share of their IT spend on Digital. This might have affected upfront revenues in the fiscal second quarter.

DXC Technology currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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