Computer Sciences Corp Post-Split: Is It A Buy?

• In late November, Computer Sciences Corporation CSC spun off CSRA Inc CSRA, formerly Computer Sciences Government Services Inc.
• In a report issued Tuesday, Cantor Fitzgerald analyst Joseph Foresi shared a look into Computer Sciences a month after the split.
• The expert decided to maintain a Hold rating accompanied by a new price target of $33.00, waiting for increased visibility on its prospects on returning to overall growth.

A month after Computer Sciences Corporation (CSC) spun off CSRA, analysts at Cantor Fitzgerald reiterated a Hold rating and issued a –new- $33.00 price target on the former’s stock. As per the research note, the firm is waiting for better visibility on the company’s prospects on resuming aggregate growth, an essential element for margin expansion.

The management team believes it is approaching the bottom in its traditional IT business, which is becoming increasingly commoditized, and that the company is nice positioned in its growth businesses in the commercial segment.

After completing the spin off of CSRA, CSC shared “pro forma historical figures for the current standalone CSC.” Consequently, Cantor decided to update its estimates and price target to better reflect the new information.

For the new standalone CSC, the firm estimates 3Q:FY16 revenue of $1.85 billion, versus the FactSet consensus of $1.87 billion, and non-GAAP EPS of $0.70, in line with consensus.

For full year fiscal 2016, the experts anticipate a 10 percent decline in revenue (3 percent constant currency) to $7.30 billion, versus consensus at $7.36 billion, and non-GAAP EPS of $2.52, compared to consensus of $2.60. Finally, for fiscal 2017, they are modeling revenue growth of 1.2 percent to $7.39 billion – versus consensus of $7.55 billion, and non-GAAP EPS of $2.86 – versus consensus of $2.94.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.