Electronic Data Systems reported fiscal Q1 net income jumped nearly sevenfold to $164 million, or $0.31/share, easily beating the Street's estimate of $0.21/share. Sales growth of 3% to $5.22b however, came up short of analysts' average estimate of $5.26b. Q1 net income was helped by earlier-than-expected contract revenue realization (+$0.04 impact on EPS) and delays in severance payments (+$0.02). Subsequently, however, EDS was forced to downward revise its Q2 guidance, causing its shares to fall 2.9% to $28.60 in the after-hours on volume of more than 500,000. EDS had gained 0.20% to $29.45 in normal trading. EDS expects Q2 adjusted EPS between $0.22 - $0.27 on sales of $5.3b - $5.5b, compared to analysts' average forecast of $0.33/share on sales of $5.44b. Q1 sales grew fastest in Asia, +25% to $409m with a 57% increase in operating profit to $38m (Americas: sales +3% to $2.62b, operating profit +20% to $405m; Europe, the Middle East and Africa: sales -9% to $1.45b, operating profit +1% to $179m).
Sources: Electronic Data Systems Q1 2007 Earnings Call Transcript, Press release, Bloomberg, MarketWatch
Commentary: Recent Earnings Strength Tied to International Exposure • EDS: Verizon Will Reel In Its IT Services • EDS: An Untapped Play on Outsourcing
Stocks/ETFs to watch: Electronic Data Systems Corp. (EDS). Competitors: Accenture Ltd. (ACN), International Business Machines Corp. (IBM), Affiliated Computer Services (ACS), Computer Sciences Corporation (CSC), Perot Systems Corporation (PER). ETFs: PowerShares Dynamic Mid Cap Value (PWP)
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