Will CSC Beat Earnings Estimates? - Analyst Blog

Computer Sciences Corporation CSC is set to report fourth-quarter 2014 results on May 8. Last quarter, the company posted a positive earnings surprise of 18.1%. Let us see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Computer Sciences posted mixed third-quarter 2014 results wherein the bottom line surpassed the Zacks Consensus Estimate but the top line lagged. Moreover, weak performances across all business segments resulted in the decline in revenues on a year-over-year basis.

Computer Sciences is adopting a cloud-based model and re-engaging the salesforce in a more efficient way. We believe that this, along with its cost rationalization initiatives will enable margin expansion. Moreover, share buybacks are expected to support the bottom line.

Furthermore, the company's traction in the cloud and partnerships with HCL, AT&T T, VMware VMW, Amazon.com AMZN and Microsoft MSFT are expected to drive growth, going forward.

However, the market is becoming competitive with companies like CACI International Inc. CACI and Accenture making their presence felt. Delay in the government's order renewal process and constricted federal spending are the near-term headwinds for the company.

Earnings Whispers?

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

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.03. Hence, the difference is 0.00%.

Zacks Rank: Computer Sciences' Zacks Rank #3 (Hold), when combined with a 0.00% ESP makes surprise prediction difficult.

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

Other Stocks to Consider

Here is another company you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Intuit Inc. INTU, Earnings ESP of +1.18% and a Zacks Rank #2 (Buy).