November 6, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of government IT services specialist Computer Sciences (NYSE: CSC ) surged 15% today after its quarterly results and outlook topped Wall Street expectations.
So what: CSC has suffered over past few years on the big cutback in government spending, but today's wide second-quarter beat -- EPS of $0.83 versus the consensus of just $0.47 -- coupled with upbeat guidance for the full year reinforces optimism over management's restructuring efforts. In fact, CSC's contract efficiency and cost-cutting initiatives led to improved operating margins of 7.7%, up from negative 1.9% in the year-ago period, triggering plenty of good vibes over the company's profitability going forward.
Now what: Management now sees full-year 2013 EPS of $2.30-$2.50, nicely ahead of the average analyst estimate of $2.24. "There is much work to be completed but we are encouraged with the early results of our turnaround program," President and CEO Mike Lawrie said in a statement. Of course, when you couple CSC's still-hefty debt load with its 52-week high-hitting stock price, Fools might want to hold out for a wider margin of safety before buying into that optimism.
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