CA Inc. - Growth & Income
14 Février 2012 - 1:00AM
Zacks
CA Inc. (CA) recently delivered a triple play for the third
quarter of its fiscal 2012: a positive earnings surprise, a
positive sales surprise, and increased guidance from management. It
was also the company's 7th consecutive positive earnings surprise.
This prompted analysts to revise their estimates
significantly higher for both 2012 and 2013, sending the stock to a
Zacks #1 Rank (Strong Buy).
In addition, the company announced a capital
allocation plan that targets to return up to $2.5 billion to
shareholders through fiscal 2014. It currently pays a dividend that
yields 3.7%.
Valuation is attractive too with shares trading at
just 11x forward earnings, well below the industry multiple.
Company Description
Formerly known as Computer Associates, CA Inc.
makes software for mainframe and other corporate computers. It
operates in 3 segments:
Subscription & Maintenance: (84% of total
revenue)
Professional Services: (8%)
Software Fees & Other: (8%)
The company is headquartered in Islandia, New York
and has a market cap of $13 billion.
Third Quarter Results
CA delivered a triple play for the third quarter of
its fiscal 2012: a positive earnings surprise, a positive sales
surprise, and increased guidance from management.
Earnings per share came in at 60 cents, crushing
the Zacks Consensus Estimate by 18%. It was a 20% increase over the
same quarter in 2011.
Revenue rose 10% to $1.263 billion, ahead of the
Zacks Consensus Estimate of $1.210 billion, including an 8%
increase in organic revenue. Each segment experienced solid revenue
growth, with Services leading the way at 16%.
Geographically, revenue was strongest in North
America, which saw top-line growth of 15%. Sales from North America
accounted for 63% of total revenue. Internationally, sales were up
3%.
Operating income increased 24% year-over-year as
the company leveraged its selling, general and administrative
expenses.
Increased Guidance
Following the strong third quarter, management
raised its earnings guidance for the remainder of 2012 and adjusted
its revenue forecast to the upper end of its previous range. The
company now expects to earn between $2.21 and $2.25 per share on
revenue growth of 6%.
This prompted analysts to revise their estimates
significantly higher, sending the stock to a Zacks #1 Rank (Strong
Buy) stock.
The Zacks Consensus Estimate for 2012 rose from
$2.02 to $2.13, which represents 11% growth over 2011 EPS. The 2013
consensus estimate increased from $2.21 to $2.39, and corresponds
with 12% EPS growth.
You can see the huge jump in consensus estimates
following the outstanding Q3 results:
![CA: CA Inc. Price & Consensus Chart CA: CA Inc.](http://www.zacks.com/images/upload_dir/1329149056.jpg)
Returning Value to Shareholders
On the same day it reported Q3 earnings, the
company announced a capital allocation program that aims to return
up to $2.5 billion to shareholders through fiscal year 2014.
The company increased its stock buyback program to
up to $1.5 billion. It also significantly boosted its quarterly
dividend from 5 cents to 20 cents per share. This translates to a
stellar yield of 3.7%.
Reasonable Valuation
Shares have been soaring since these announcements,
but the valuation picture still looks attractive for CA. Shares
trade at just 11.3x 12-month forward earnings, a discount to the
industry median of 14.1x and its 10-year median of 24.1x.
Its price to book ratio of 2.3 is also well below
the industry median of 3.8 and its 10-year median of 2.9.
The Bottom Line
With estimates rising following its impressive
triple play last quarter, and with a 3.7% yield and very reasonable
valuation, CA offers investors attractive total return
potential.
Todd Bunton is the Growth & Income Stock
Strategist for Zacks Investment Research and Co-Editor of the
Reitmeister Value Investor.
CA INC (CA): Free Stock Analysis Report
To read this article on Zacks.com click here.
Xtrackers California Mun... (NASDAQ:CA)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024
Xtrackers California Mun... (NASDAQ:CA)
Graphique Historique de l'Action
De Juil 2023 à Juil 2024