Will Computer Sciences (CSC) Q1 Earnings: What's In Store?

Computer Sciences Corporation (NYSE:CSC) is set to report first-quarter fiscal 2017 results on Aug 8, 2016. Last quarter, the company posted a positive earnings surprise of 7.4%. Let's see how things are shaping up for this announcement.

Factors at Play

Computer Sciences Corporation is one of the leading players in the information technology services industry.

Recently, CSC announced its decision to merge its business with Hewlett Packard Enterprise Company’s (HPE) Enterprise Services business, which will be spun off from the parent company. This deal will bring together CSC’s strengths in insurance, healthcare and financial services along with HPE’s Enterprise Services expertise in industries like transportation, pharma, technology, media and telecom.

Apart from this, the company has been making strategic acquisitions to strengthen its portfolio, which should drive growth over the long run.

Following the acquisition of UXC, the company recently acquired another company Xchanging. These are expected to contribute to the company’s revenues in the to-be reported quarter.

Additionally, the company’s traction in the cloud and partnerships with HCL, AT&T (NYSE:T) , VMware and Microsoft (NASDAQ:MSFT) are expected to drive growth, going forward.

However, the company will likely face some challenges with regard to the integration of the new businesses and the costs associated with them. Apart from this, increased competition and delay in government’s order renewal process and constricted federal spending are the other concerns.

COMP SCIENCE Price and EPS Surprise

COMP SCIENCE Price and EPS Surprise | COMP SCIENCE Quote

Earnings Whispers

Our proven model does not conclusively show that Computer Sciences will beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP is -6.38% as the Most Accurate estimate of 44 cents is pegged lower than the Zacks Consensus Estimate of 47 cents.

Zacks Rank: Computer Sciences’ Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Alamos Gold, Inc. (TO:AGI) , with an Earnings ESP of +100.0% and a Zacks Rank #2

Vivint Solar, Inc. (NYSE:VSLR) , with an Earnings ESP of +1.79% and a Zacks Rank #3