Earnings Preview: CA Inc. - Analyst Blog
24 Ottobre 2011 - 5:30PM
Zacks
CA Inc. (CA) is scheduled to announce its
second quarter 2012 results on October 26, 2011 after market close,
and we do not see much variation in analysts’ estimates at this
point.
First Quarter Overview
The company reported decent first quarter 2012 results, with EPS
of 52 cents surpassing the Zacks Consensus Estimate. CA earned
$1.16 billion in revenues, up 9.0% from $1.07 billion reported in
the year-ago quarter.
The year-over-year growth in revenue was primarily attributable
to healthy demand for its service assurance, identity and access
management, Nimsoft and mainframe products. About 62.0% of the
company's revenue came from North America, while the remaining was
derived from International operations.
Operating income in the first quarter stood at $228.0 million,
up from $221.0 million in the year-ago quarter.
CA Inc. generated cash flow from continuing operations of $143.0
million compared with $122.0 million in the prior-year quarter.
Cash, cash equivalents and marketable securities were $2.95
billion. The company's net cash, cash equivalents and marketable
securities position was $1.64 billion while total debt outstanding
was $1.307 billion.
For fiscal 2012, the company expects revenue growth in the range
of 6.0% to 8.0% at constant currency. The company estimates
revenues of between $4.9 billion and $5.0 billion. GAAP diluted
earnings per share growth are projected in the range of 5.0% to
9.0% at constant currency, down from the previous range of 6.0% to
11.0%. GAAP earnings per share are expected to be between $1.79 and
$1.86.
Non-GAAP diluted earnings per share are expected to grow in a
range of 6.0% to 10.0%, implying non-GAAP diluted earnings per
share in the band of $2.14 to $2.21.
Agreement of Analysts
Out of the seven analysts providing estimates for the first
quarter, none revised estimates over the last 30 days. Similarly,
no revision was witnessed for fiscal 2012 and 2013.
The lack of estimate revisions reflects the fact that there were
no major catalysts during the quarter. Consequently, the analysts
are sticking to the estimates projected post fourth quarter
earnings.
Some analysts believe that CA should see growth in the 8.0%
range, whereas organic growth should rise in the mid-single digits
range from 1.0% in FY11, coupled with a favorable free cash flow
yield of 13.0%. But the trajectory of renewals is a proxy for
future growth and we believe this metric could decelerate as the
renewal pipeline will likely not trough until the FY13
timeframe.
A greater conviction in seeing an inflection point in the future
renewal opportunity would likely induce us to have a more
constructive view on the stock.
The company is investing heavily in cloud computing and we agree
that prospects in this segment are bright. However, the company
faces stiff competition from major players in this space.
Magnitude of Estimate Revisions
The magnitude of revision is also minimal since the company
reported its first quarter results. Overall, estimates for the
upcoming quarter have remained constant over a period of 30 and 90
days.
Again for fiscal 2012, estimates decreased by a penny to the
current estimate of $2.05 over the last 90 days. There has been no
revision in estimates over the past 30 days. For 2013, the
estimates have moved down by a cent over the last 90 days.
Recommendation
We are optimistic about the company’s positive outlook for
fiscal 2012, enhanced product portfolio, growing customer base and
revival in the macroeconomic scenario. This should also help the
company to generate modest numbers going forward.
On the other hand, we are concerned about the intense
competition in the software & cloud computing space from big
players, such as International Business Machines
(IBM) and Hewlett-Packard Company (HPQ). This
apart, its high debt balance may pose some challenges going
forward.
The company currently has a Zacks #3 Rank, implying a short-term
Hold rating.
CA INC (CA): Free Stock Analysis Report
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