Those of you who have been following EDS (NYSE:EDS) know that things have been tough for the IT contractor for a few years. EDS shares may have soured after the company reported earnings yesterday, but some may be wondering whether things have started to settle down.
Yesterday, EDS did manage to turn its quarterly loss from this time last year into a quarterly profit. The company reported first-quarter net income of $4 million, or $0.01 per share. That compares to last year's first-quarter loss of $12 million, or $0.02 per share.
EDS may have squeezed some profitability out of the quarter by cutting costs, but its revenues were down 5% at $4.94 billion. It separated out "organic revenue," or revenue that excludes the impact of currency fluctuations, acquisitions, and divestitures, which resulted in a decrease of 8%.
Investors might take heart in the fact that EDS signed $7.1 billion worth in contracts (including a whopping 10-year, $3.85 billion contract with the U.K. Ministry of Defense). Also, the company is setting its sights toward increasing cash flow and reducing its debt load and is considering a sale of its A.T. Kearney unit as well as the sale of several pieces of real estate that will help offset some of the expenses that will come attached to the U.K. contract.
Second-quarter numbers at EDS may leave something to be desired, since the company said to get ready for a larger-than-anticipated loss per share and that it will earn $0.10 less for the entire year. However, the company aims to provide between $500 million and $700 million in free cash flow for the year.
And while things might look better for the company in terms of contracts it has won, it still faces big-name rivalry from companies such as IBM (NYSE:IBM), Accenture (NYSE:ACN), and Computer Sciences (NYSE:CSC).
EDS may be struggling out of its previous rather painful phase, and there are heartening signs, but heavy consideration is due as the company continues to work through its past problems. There don't seem to be any clear-cut catalysts either way. As is always the case with potential turnaround stories, the proof may be a long time coming.
Reacquaint yourself with EDS and its struggles over the course of the last year through the following Foolish commentary:
- Back in the fall, EDS earnings didn't surprise.
- Anticipation for EDS.
- Remember when EDS was looking for answers?
- There was a point when some might have thought EDS earnings were an epitaph.
Alyce Lomax does not own shares of any of the companies mentioned.
