WASHINGTON (dpa-AFX) - IT services provider Computer Sciences Corp (CSC), on Tuesday reported a better-than-expected increase in first-quarter profit, driven by margins that offset a near 15 percent drop in revenue.
The company said it faced revenue pressure from a stronger dollar, repositioning of the consulting business, restructured contracts, thereby missing Street expectations.
CSC, which is splitting into two publicly traded companies, reaffirmed its earnings guidance for 2016.
The company also said it has agreed to buy Fixnetix, a provider of front-office managed trading solutions in capital markets, and Fruition Partners, a provider of technology-enabled solutions for the service-management sector. The financial terms were not disclosed.
For the first quarter, CSC reported net earnings to common stockholders of $160 million or $1.14 per share, compared with $146 million or $0.98 per share last year.
Excluding separation costs and divestment gains, adjusted earnings were $1.11 per share, compared with $1.03 per share a year ago. On average, 15 analysts polled by Thomson Reuters estimated earnings of $1.01 per share for the quarter. Analysts' estimates typically exclude special items.
CSC, based in Falls Church, Virginia, said its sales for the quarter fell 14.7 percent to $2.76 billion from $3.24 billion a year ago. Thirteen analysts had a consensus sales estimate of $2.82 billion.
Revenue at its business services segment fell 15.5 percent, infrastructure services slid 21.8 percent, and North American public sector declined 6 percent.
Operating margin improved to 10.8 percent from 9.4 percent last year.
For the full year 2016, CSC still expects adjusted earnings of $4.75 to $5.05 per share, while analysts currently expect $4.85 per share.
In May, CSC said it will split into two publicly traded companies: one to serve commercial and government clients globally, and the other to serve public sector clients in the U.S. CSC still expects to complete the separation by October.
CSC said the Fixnetix deal will enable it to offer capital market clients an expanded range of as-a-service front office capabilities and will better address demand in trading, market data, and risk management.
The purchase of Fruition Partners will help offer enterprise and emerging clients a broader range of cloud-based service-management solutions, CSC said.
The Fixnetix deal is expected to close in the third quarter of 2015, and Fruition Partners in autumn 2015.
CSC closed Tuesday at $64.20, down $1.16 or 1.77%, on a volume of 1.5 million shares on the NYSE. In after hours, the stock gained $0.80 or 1.25% at $65.00. In the past year, the stock has traded in the range of $54.23 - $73.29.
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