Monday, 3 February 2014

CSC – Q3 FY2014 earnings call. On the one hand but there again on the other!

CSC – Q3 FY2014 earnings call – more of the same!!

CSC announced its Q3 FY2014 earnings and held its Analyst Conference Call last week. And it was “more of the same” with continued earnings and margin growth, beating Wall Street expectations, allied to continued revenue declines and lackluster new business wins. But the markets seemed to buy it all, as the share price surged 10% after the announcement, to break US$60 for the first time in years.

Highlights of the Q3 FY2014 results were:

* Revenues totaled US$ 3.228 billion, down 9.7% from the US$ 3.536 billion recorded in Q3 FY2013, but flat with Q2 FY2014.

* Operating margin of 9.8% compared to 7.4% in the same quarter of FY2013.

* Net Income of US$ 141 million, being US$ 30 million higher than the continued operations equivalent of Q3 FY2013.

* EPS from continuing operations reached US$ 0.98c per share, up by US$ 0.25c from Q3 FY2013, and US$ 0.34c above the consensus of Analysts’ expectations.

* New Business Bookings totaled US$ 3.3 billion. This compares with US$ 2.9bn in Q2 FY2013, but US$4.2bn in Q2 FY2014.

The Analyst Conference was also “the same old song”, being very professional with lots of positive statements about the quarter’s results and CSC’s future prospects.

CEO Mike Lawrie and CFO Paul Saleh gave their usual articulate and polished performances. They answered the Analysts’ questions with assurance and gave the impression of really knowing what is going on in their business. They talked confidently about Cost Take Out program, alliances and acquisitions, strength in cyber and cloud, working on next generation offerings, revitalizing the sales force and even a few anecdotes about the mess they inherited when they came to CSC. But no mention of the latest class action suit regarding none performance of a health service contract in USA.

The analysts, as before, cooed in awe at the accomplishments and figuratively tossed up easy balls for Messrs Lawrie and Saleh to hit. The only potentially difficult question concerned an update on progress (or lack of) against expectations in achieving revenue. Mike Lawrie adroitly kicked this into the long grass of next fiscal year.
It was all so upbeat, confident and accomplished that we could almost believe it, except for the nagging reality of the very different story we hear from CSC employees and yet another law suit alleging non-performance. 
What is really going on? Go ask Alice - click here.