Why Is DXC Technology (DXC) Down 17.6% Since Last Earnings Report?

A month has gone by since the last earnings report for DXC Technology Company. (DXC). Shares have lost about 17.6% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is DXC Technology due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts. DXC Surpasses Q3 Earnings and Revenue EstimatesDXC reported better-than-expected bottom-line results for the third quarter of fiscal 2025. The company reported non-GAAP earnings of 92 cents per share, beating the Zacks Consensus Estimate by 19.5%. Moreover, the bottom line increased 7% year over year.DXC’s Q3 Results in DetailDXC reported revenues of $3.23 billion for the third quarter, which came above the Zacks Consensus Estimate by 0.7% but decreased 5.1% year over year. On an organic basis, revenues declined 4.2% year over year.Segment-wise, revenues from Global Business Services declined 1.8% on a year-over-year basis to $1.67 billion. On an organic basis, the division’s revenues decreased 0.5% year over year. The organic growth in revenues was mainly driven by traction in insurance software and BPS business.GIS revenues were $1.56 billion in the fiscal third quarter, down 8.5% year over year. On an organic basis, the division’s revenues decreased 7.8% year over year. The GIS division witnessed revenue declines across the Cloud Infrastructure, ITO & Security and Modern Workplace divisions.The company’s non-GAAP gross profit increased 6% to $809 million from $763 million reported in the year-ago quarter. Non-GAAP gross margin improved 150 basis points to 25.1%. This expansion was primarily driven by savings from disciplined resource management practices and benefits from restructuring, which more than offset the negative impact of lower revenues and the data center hardware asset disposal.DXC’s non-GAAP operating income increased to $286 million in the fiscal third quarter from $256 million in the year-ago quarter. Non-GAAP operating margin expanded 140 basis points to 8.9%, primarily driven by higher gross margin.DXC’s Balance Sheet & Cash Flow DetailsDXC exited the fiscal third quarter with $1.72 billion in cash and cash equivalents compared with $1.25 billion in the previous quarter. The long-term debt balance (net of current maturities) was $3.64 billion as of Dec. 31, 2024, down from $3.83 billion as of Sept. 30.In the fiscal third quarter, DXC generated an operating cash flow of $650 million and a free cash flow of $483 million. In the first three quarters of fiscal 2025, it generated an operating cash flow of $1.08 billion and a free cash flow of $576 million.DXC Updates Guidance for FY25DXC updated the outlook for fiscal 2025, under which it raised guidance for every metric except for the revenues. For fiscal 2025, it now expects revenues between $12.8 billion and $12.83 billion compared with the previous guidance of $12.9-$13.1 billion.DXC now projects the adjusted EBIT margin to be approximately 7.9%, up from the previous guidance of 7-7.5%. It now forecasts adjusted EPS of $3.35 compared with the previous guidance of $3-$3.25.For the fiscal fourth quarter, the company anticipates revenues between $3.10 billion and $3.13 billion. The adjusted EBIT margin is expected to be approximately 7%. DXC projects adjusted earnings per share of 75 cents for the fiscal fourth quarter.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in estimates review.VGM ScoresAt this time, DXC Technology has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, DXC Technology has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Performance of an Industry PlayerDXC Technology belongs to the Zacks Computers - IT Services industry. Another stock from the same industry, Roper Technologies (ROP), has gained 2.1% over the past month. More than a month has passed since the company reported results for the quarter ended December 2024.Roper Technologies reported revenues of $1.88 billion in the last reported quarter, representing a year-over-year change of +16.3%. EPS of $4.81 for the same period compares with $4.37 a year ago.For the current quarter, Roper Technologies is expected to post earnings of $4.73 per share, indicating a change of +7.3% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.Roper Technologies has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. 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