Electronic Data Systems Posts Strong Quarter But Lowers Forecast for Q3

Includes: EDS, IBM
by: Jonathan Liss

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

EDS's Earnings Surged in Period, Led by Big Pacts

  • Summary: Electronic Data Systems Corp. (NASDAQ:EDS) said yesterday its second-quarter profit quadrupled and that its improving financial health is allowing it to accelerate job-cut plans. EDS said profits will be squeezed by increased severance costs during the third quarter from a plan to cut 4,000 jobs in high cost locations throughout Europe and North America, but much of the hit will be offset by strong revenue growth allowing the company to meet full-year earnings targets. EDS reported second-quarter net income of $104 million, or 20 cents a share, compared with $26 million, or five cents a share, a year ago. Revenue rose 3.9% to $5.19 billion, driven by improved performance for large contracts with the British Ministry of Defense and the U.S. Navy. In addition, EDS said it signed $5.4 billion in contracts in the second quarter, more than double the $2.6 billion signed in the year-ago quarter. For the third quarter, EDS said it expects earnings, excluding items, of 16 cents to 21 cents a share on revenue of $5.3 billion to $5.5 billion. Analysts surveyed by Thomson Financial have forecast earnings of 29 cents on revenue of $5 billion. For the year, EDS stuck to its forecast for earnings, excluding items, of 83 cents to 93 cents a share. It raised its revenue target to between $21 billion and $21.5 billion from a range of $20 billion to $20.5 billion.
  • Comment on related stocks/ETFs: EDS's main competitor, IBM, was downgraded by Goldman Sachs from a BUY to a NEUTRAL rating following their recent earnings release. Here's a look at IBM's recent conference call transcript.

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Tagged: Earnings
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