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Why DXC Stock Gained Today

By Evan Niu, CFA – Aug 7, 2020 at 2:35PM

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The tech consultancy reported quarterly earnings results that beat expectations.

What happened

Shares of DXC Technology (DXC -2.46%) have gained today, up by 5% as of 1:20 p.m. EDT, after the company reported fiscal first-quarter earnings. Both top- and bottom-line results beat analyst expectations.

So what

Revenue in the fiscal first quarter came in at $4.5 billion, ahead of the $4.3 billion in sales that Wall Street was looking for. That resulted in adjusted net income of $59 million, or $0.21 per share. The consensus estimate had called for just $0.11 per share in adjusted profits. The information technology consulting company said total bookings were $5.3 billion during the quarter, representing a book-to-bill ratio of 1.2.

A man holds a tablet and pen and explains something to a man seated next to him

Image source: Getty Images.

"[The book-to-bill ratio] is clear evidence that we are executing on our transformation journey," CEO Mike Salvino said in a statement. "Our focus on customers is allowing us to stabilize revenues, expand margins, and bring the "new DXC" to the market, helping us win more work."

Now what

Subsequent to the close of the quarter, DXC had announced that it was selling its healthcare software business to Dedalus for $525 million in cash, which Salvino said would further enhance the company's financial flexibility. DXC also said it is on track to achieve its target of $550 million in cost reductions.

While the company added that it is encouraged by the progress it is making with its strategic transformation, it is not providing full-year guidance due to ongoing uncertainty stemming from the coronavirus outbreak. Management did add that it expects revenue to stabilize and margins to expand in the second quarter and that the company is targeting a book-to-bill ratio of 1.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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