BMO Capital Markets has adjusted its outlook on DXC Technology (NYSE: NYSE:DXC), increasing the stock's price target to $22.00 from the previous $17.50. This change reflects a maintained Market Perform rating for the company.
DXC Technology recently reported financial results that exceeded expectations, leading to a revision of estimates by BMO Capital. The firm acknowledged DXC's efforts in enhancing its execution with current clients and refining its cost structure, despite no perceived improvement in the broader demand environment.
According to BMO Capital, DXC Technology is at the beginning stages of a process aimed at boosting margins via cost reductions and enhancing revenue potential. The analyst firm's decision to maintain a Market Perform rating while elevating the price target to $22 is based on these operational adjustments.
The analyst from BMO Capital expressed a belief that DXC is in the preliminary phase of its journey to enhance margins through cost savings and to unlock greater top-line growth possibilities.
DXC Technology reported a 4% year-over-year decline in total revenue during its first-quarter fiscal year 2025 earnings call, with a total revenue of $3.2 billion. Despite the decrease in revenue, the company's adjusted EBIT margin improved by 40 basis points to 6.9%, and non-GAAP diluted earnings per share (EPS) saw a 17% year-over-year increase to $0.74. DXC Technology is currently revamping its go-to-market strategy, focusing on operational efficiency and enhanced delivery models.
The company's Global Business Services (GBS) revenue grew 1% year-over-year, while Global Infrastructure Services (GIS) revenue declined by 9%. DXC Technology anticipates a year-over-year total revenue decline of 6% to 4% on an organic basis for the full year. The adjusted EBIT margin for the full year is projected to be between 6.5% to 7%, and non-GAAP diluted EPS is expected to be between $2.75 and $3, with free cash flow forecasted to be approximately $450 million.
InvestingPro Insights
With DXC Technology (NYSE:DXC) in the spotlight following BMO Capital Markets’ updated price target, investors are closely watching the company's performance metrics. According to InvestingPro data, DXC Technology currently has a market capitalization of $3.3 billion and a forward P/E ratio of 29.46, indicating that the stock may be trading at a discount relative to its near-term earnings growth potential. The company's revenue for the last twelve months as of Q4 2024 stands at $13.67 billion, despite a decline in revenue growth of -5.29%.
InvestingPro Tips highlight that DXC Technology is expected to see net income growth this year and is trading at a low revenue valuation multiple, which could appeal to value-oriented investors. These factors, combined with the company's position as a prominent player in the IT Services industry, may offer additional context for BMO Capital Markets' rating and price target. For investors seeking more in-depth analysis, there are 11 additional InvestingPro Tips available, providing a comprehensive look at DXC's financial health and market position.
As DXC Technology hones its strategies for margin improvement and revenue growth, these InvestingPro insights can serve as valuable tools for investors assessing the company's potential in the current economic landscape.
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