Why Computer Sciences Shares Soared
Nov 6th 2012 3:50PM
Updated Nov 6th 2012 3:54PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of government IT services specialist Computer Sciences (NYS: CSC) surged 15% today after its quarterly results and outlook topped Wall Street expectations.
So what: CSC has suffered over past few years on the big cutback in government spending, but today's wide second-quarter beat -- EPS of $0.83 versus the consensus of just $0.47 -- coupled with upbeat guidance for the full year reinforces optimism over management's restructuring efforts. In fact, CSC's contract efficiency and cost-cutting initiatives led to improved operating margins of 7.7%, up from negative 1.9% in the year-ago period, triggering plenty of good vibes over the company's profitability going forward.
Now what: Management now sees full-year 2013 EPS of $2.30-$2.50, nicely ahead of the average analyst estimate of $2.24. "There is much work to be completed but we are encouraged with the early results of our turnaround program," President and CEO Mike Lawrie said in a statement. Of course, when you couple CSC's still-hefty debt load with its 52-week high-hitting stock price, Fools might want to hold out for a wider margin of safety before buying into that optimism.
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The article Why Computer Sciences Shares Soared originally appeared on Fool.com.Fool contributor Brian Pacampara has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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