Well, this stock is getting hammered again, but apparently it is
due to EDS earnings being down. Hopefully CSC will show a good
earnings report. (When will it be announced?)
Copied from the Motley Fool noon report 4/25:
EDS Rightsized
ELECTRONIC DATA SYSTEMS (NYSE: EDS) (N) (S) tumbled $9 3/8 to $32 5/8 after the
company reported that first quarter earnings per share (EPS) declined 11% year-over-year. EDS
reported $0.40 EPS on $3.6 billion in revenues, a 6.7% increase from year ago levels. The
earnings number disappointed consensus estimates, which had pegged first quarter profits at $0.48
EPS. Operating margins dropped from 10.7% to to 9.1%, explaining much of the shortfall. Not to
worry, though. The company's own management consulting subsidiary, A.T. Kearney, has crafted
a plan that will "set the stage for sustained growth going forward as well as enhance EDS' ability to
reach its 1997 earnings target." EDS still thinks it can produce EPS of $2.30 to $2.35, less a charge
in the second quarter, in line with current consensus estimates of $2.36 per share
EDS has been disappointing investors since October 23, 1996, when shares dropped more than $11
in one day after the company warned that its fiscal fourth quarter would be disappointing due to
slow growth in new business, Department of Defense cutbacks due to overspending on the Bosnia
mission, and new business from former parent GENERAL MOTORS (NYSE: GM) (N) (S)
slacking off. Problems in growth began almost immediately after the consulting company finally
separated completely from General Motors, making the divestiture a pretty savvy move in
retrospect. Once viewed as a thoroughbred growth company in the computer services segment,
investors are increasingly distancing themselves from a flagging EDS.
Although many initially saw the problem as EDS simply shifting from being a 15% to 20% grower
to a 10% to 15% grower, it appears the problem is a little more complicated. While competitor
COMPUTER SCIENCES CORP. (NYSE: CSC) (N) (S) is down $3 1/4 to $61 1/2 on
today's EDS news, the fact that EDS has been having problems does not seem to be impacting the
company. Last quarter Computer Sciences grew revenue by 14.9% compared to 10.6% for EDS.
None of this seems to have affected the computer services arm of IBM (NYSE: IBM) (N) (S),
either. In its most recently reported quarter, IBM's revenues from services grew 28.1%, while the
gross profit margin for that business improved 0.1%. Whatever is ailing EDS has definitely not
shown symptoms that it is contagious yet. |
