DXC Technology (NYSE:DXC) shares tumbled 22% in premarket Thursday after the company reported weaker-than-expected FQ1 results and offered a disappointing outlook.
The company posted a profit per share of 61 cents on revenue of $3.45 billion for its first fiscal quarter, worse than the expected profit per share of 82 cents on revenue of $3.56B. The weaker-than-expected Q1 sales were fueled by an 11% year-over-year drop in Global infrastructure services revenue.
Overall, organic revenue fell 3.6% YoY.
Mike Salvino, DXC's chairman, president and chief executive officer commented: “Our first quarter FY24 financial performance was mixed. While revenue and margin fell short of our expectations, free cash flow was better than expected. Our performance was impacted by lower than anticipated resale and project revenues. As a result of these factors, today we are reducing our guidance to reflect the challenging economic environment."
The company now sees FY EPS in the range of $3.15-$3.40, easily below the expectations for $3.86. Revenue is seen between $13.88B and $14.03B, while the Street was looking for $14.4B.
For this quarter, the company guided to $0.65-$0.70 in EPS on revenue of $3.43B-$3.46B, a significant miss to expectations for EPS of $0.92 on revenue of $3.57B.
At least 3 Wall Street analysts downgraded DXC shares today. BMO analysts moved to Market Perform from Outperform.
“We are stepping to the sidelines on DXC. In short, we think a tough macro is a challenging time to continue a turnaround, and we do not envision relief in the medium-term. More specifically, while GBS is performing reasonably well, GIS continues to flounder. We are reducing our target price from $27 to $25, and we move to a Market Perform rating. We believe that both Accenture (NYSE:ACN) and Cognizant (NASDAQ:CTSH) offer better risk/reward at this juncture than DXC, for those looking for services exposure,” the analysts explained.
Similarly, RBC analysts downgraded to Sector Perform with a new price target of $29 per share.
“Given the pressure on demand, especially in the GIS segment, the disappointing results, and guidance reduction, we expect the shares to be weak tomorrow and then relatively rangebound for the foreseeable future; therefore, we are stepping aside and downgrading the shares.”