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DXC Technology (DXC) to Post Q4 Earnings: What's in Store?

Zacks Equity Research

DXC Technology Company DXC is set to report fourth-quarter fiscal 2020 results on May 28.

For the quarter, the Zacks Consensus Estimate for revenues stands at $4.92 billion, indicating a 6.74% decline from the year-ago quarter’s reported figure. The consensus mark for earnings is 97 cents per share, suggesting a 55.71% decline.

The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in the remaining one, the average positive surprise being 4.78%.

Let’s see how things are shaping up for the upcoming announcement.

DXC Technology Company. Price and EPS Surprise

DXC Technology Company. Price and EPS Surprise

DXC Technology Company. price-eps-surprise | DXC Technology Company. Quote

Factors at Play

DXC Technology’s fiscal fourth-quarter earnings are likely to have benefited from continued strength in the Digital business, driven by growth in enterprise and cloud apps, cloud infrastructure, and digital workplace offerings.

Further, the Luxoft business is likely to have been a key driver in the quarter. The company’s efforts in the autonomous and connected vehicles market are expected to have positively impacted the quarterly performance. Automotive partnerships with the likes of Daimler and most recently, LG electronics, are positives.

Moreover, the Global Business Services segment is expected to have been a key top-line driver. The Zacks Consensus Estimate for revenues from this segment stands at $2.32 billion, indicating 5.9% year-over-year growth.

However, two large cash outflows — one for the company’s annual 401-K match and the second for a contract settlement payment (which is expected to be recovered in fiscal 2021 from insurance coverage) — are likely to reflect on the fiscal fourth-quarter performance.

Moreover, a weak traditional business is likely to have negatively impacted the top line in the quarter under review.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for DXC Technology this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

DXC Technology has an Earnings ESP of +7.03% but a Zacks Rank #4 (Sell).

Stocks to Consider

Here are a few stocks you may consider, as our model shows that these have the right combination of elements to beat on earnings this season:

Dropbox, Inc. DBX has an Earnings ESP of +5.69% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shopify Inc. SHOP has an Earnings ESP of +26.60% and a Zacks Rank #2.

Fortinet, Inc. FTNT has an Earnings ESP of +0.87% and a Zacks Rank #2.

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