Market Overview

Computer Sciences' Coming Spin-Off Makes It Worth Considering, Says Citi


In a report published Friday, Citi analyst Ashwin Shirvaikar upgraded the rating on Computer Sciences Corporation (NYSE: CSC) from Neutral to Buy, while raising the price target from $73 to $77, citing the upcoming tax-free spin-off event.

Computer Sciences is splitting into two independent, publicly traded entities. The spin-off of the company's US Government Services business is expected to be complete by October 2015. This, along with the $10.50 special dividend, creates "a good economic opportunity to Buy CSC," analyst Ashwin Shirvaikar said, while adding that the upgrade in rating reflected the "event-driven potential" for a total return of about 23 percent.

In the report Citi noted, "CSC has undergone a successful multi-year transformation that improved its cost structure and streamlined its businesses – this is the next logical value-creation step in the absence of meaningful top-line growth. But we believe the Street has largely ignored this opportunity."

Shirvaikar added, "We considered the special dividend, the related interest costs for the $1.5 billion higher net debt and a conservative view of possible dis-synergies from creating two entities. We like that even the low end of the comp multiple range provides enough upside for our Buy."

Latest Ratings for CSC

Mar 2017Initiates Coverage OnSector Weight
Oct 2016UpgradesNeutralBuy
Oct 2016MaintainsOverweight

View More Analyst Ratings for CSC
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Posted-In: CitiAnalyst Color Upgrades Price Target Analyst Ratings


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