Electronic Data Systems Doubles Profit On Cost Cutting Measures

Feb. 8.07 | About: EXCEED COMPANY (EDS)

Electronic Data Systems reported 4Q06 earnings that included a doubling of profit as well as a nice increase in revenue on reduced costs and an increase in a contract to run the Navy's computer system.eds By the numbers, net income rose to $217 million, good for $0.42, up from $112 million (EPS of $0.21) in the year earlier period. Revenue rose 11%, to $5.7 billion. Excluding one-time items, earnings were actually $0.47 cents a share in the recent quarter. Consensus Bloomberg estimates were for EPS of $0.37 on sales of $5.53 billion. EDS is currently contracted to run the Navy's computer system for $9.9 billion; the company has also been cutting costs by shifting work to lower-cost countries, including India and China. According to Jefferies analyst Joseph A. Vafi, "A larger offshore presence has helped margins and brought costs down." Shares were higher by $1.10 (4.06%) to $28.18 in After hours action.

Sources: Electronic Data Systems Q4 2006 Earnings Call Transcript, Press Release, New York Times, TheStreet.com, MSN/FT.com
Commentary: EDS: An Untapped Play on Outsourcing, Accenture, EDS, Perot, Affiliated Computer: Stock Risk From Increased Outsourcing?, Cramer's Take on EDS
Stocks/ETFs to watch: Electronic Data Systems Corp. (NASDAQ:EDS). Competitors: International Business Machines Corp. (NYSE:IBM), Affiliated Computer Services (ACS), Computer Sciences Corporation (NYSE:CSC), Perot Systems Corporation (NYSE:PER)

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