Electronic Data Systems Jumps on Strong Outlook, Margins

Nov. 2.07 | About: EXCEED COMPANY (EDS)

Electronic Data Systems Corp. posted Q3 earnings and revenue that were with in-range with analyst estimates. The company reiterated its full-year forecast and upped its revenue outlook, which apparently pleased investors concerned over the computer services provider's challenging environment, sending shares 4.8% higher in pre-market trading. Q3 net income rose to $225 ($0.42/share), from $125 million ($0.24/share) a year ago. Revenue increased to $5.63 billion from $5.29 billion. Analysts polled by Reuters were looking for EPS of $0.41 on revenue of $5.7 billion. "While we have made significant progress, work remains for EDS to reach its long-term goals, and we will not settle for the status quo," CEO Ron Rittenmeyer said. "Moving forward, our focus will be on improving our mix of higher-margin work, driving productivity and improving our working capital management," (full earnings call transcript later today). EDS signed $5.7 billion in contracts in Q3, up 63% -- its best Q3 in five years. Operating margin rose to 6.4% from 4%. Overseas IT-outsourcing centered in India and China have taken a bite of U.S.-based companies' earnings. Larger rivals like IBM and Computer Sciences Corp. present their own set of challenges. "EDS faces a challenging environment," Credit Suisse analyst Bryan Keane told Bloomberg in a pre-earnings interview. "The company needs to reinvest and figure out how to change its mix toward higher-margin, better-cash-flow business in the upcoming year." For the year, EDS still projects EPS of $1.55-1.60, but boosted its revenue outlook to $22 billion to $22.5 billion from $22 billion.

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