DXC Technology (DXC) is scheduled to announce its first-quarter fiscal 2025 results on August 8. The company forecasts revenues between $3.1 billion and $3.15 billion for the quarter, with analysts estimating a 8.8% year-over-year decline to $3.14 billion. Anticipated non-GAAP earnings per share of 55 to 60 cents reflect a 9.5% decrease from the previous year.
In the past four quarters, DXC managed to surpass earnings expectations three times, falling short once. The company has seen an average surprise of 2.4%.
Factors Driving Performance
DXC’s first-quarter performance is expected to benefit from strong customer retention rates and recurring revenues from major insurance carrier clients. The company’s growth in the cloud computing sector, supported by customer network modernization efforts, is likely to positively impact results. Additionally, DXC’s expanding artificial intelligence (AI) capabilities in conjunction with partnerships with industry giants like Microsoft and Dell Technologies are poised to bolster fiscal first-quarter results.
During the quarter under review, DXC inked deals with Ferrovial and Microsoft to develop an AI platform, Quercus. Collaborating with Dell, the company worked on enhancing Enterprise Intelligence Services, leveraging both firms’ expertise in AI, data analytics, machine learning, and intelligent automation.
However, gains from these initiatives may be dampened by softening IT spending as businesses delay investments in technology due to continued macroeconomic and geopolitical challenges. DXC projects a 7-8% organic revenue decline in the first quarter primarily driven by expected weak performance in Global Infrastructure Services (GIS).
GIS revenues are anticipated to witness a double-digit percentage drop in the same period, likely weighing on quarterly margins. The company projects an adjusted EBIT margin of 5.5-6% for the fiscal first quarter.
Analysts’ Projections and Outlook
DXC’s cost-saving measures and reduced interest expenses are expected to partially offset the adverse impact of revenue shortfalls on bottom-line results. While the company’s earnings track record is positive, our model does not conclusively predict an earnings beat for DXC this season. Despite having a Zacks Rank #3 and an Earnings ESP of 0.00%, the chances of an earnings beat do not appear to be substantial.
Potential Investment Opportunity
For investors looking for opportunities, Brinker International (EAT) is worth considering, with an Earnings ESP of +8.02% and a Zacks Rank #1. The company is set to announce its fourth-quarter fiscal 2024 results on August 14, projecting earnings growth of 18.7% year-over-year. EAT shares have delivered a 37.4% return year-to-date.
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