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On Thursday, RBC Capital Markets adjusted its outlook on DXC Technology (NYSE: NYSE:DXC), reducing the price target from $27.00 to $18.00. Despite this change, the firm maintained a Sector Perform rating on the company’s shares. The adjustment follows DXC Technology’s recent financial results, which showcased a strong quarter with both revenue and adjusted earnings per share (EPS) surpassing the projections of RBC Capital and other Wall Street estimates. According to InvestingPro data, DXC currently trades at an EV/EBITDA multiple of 4.1x, suggesting a relatively modest valuation for this prominent IT Services player.
DXC Technology reported notable improvements in its book-to-bill ratios, with Global Infrastructure Services (GIS) achieving a 1.28x ratio and Global Business Services (GBS) reaching a 1.16x ratio in the quarter, compared to last year’s figures. This indicates a healthy pipeline of future revenue based on current contract signings. While the company reported a loss in the last twelve months, InvestingPro analysis shows strong free cash flow generation of $1.15 billion and analysts expect a return to profitability this year.
The firm’s analysis pointed out that despite the positive quarterly results, there are concerns about the broader economic climate and the company’s exposure to larger product mixes. Additionally, a weaker performance in April, particularly in the consumer and retail sectors, has led to guidance that did not meet market expectations. With a current ratio of 1.34x and a manageable debt-to-equity ratio of 1.51x, the company maintains reasonable financial flexibility to navigate these challenges.
The subdued guidance provided by DXC Technology led to a negative response from investors in after-hours trading. The stock’s movement reflected the market’s reaction to the company’s near-term outlook amidst the uncertain macroeconomic environment.
RBC Capital’s revised price target reflects a more cautious stance on DXC Technology’s stock, acknowledging the company’s solid quarterly performance but also considering the potential challenges it faces in the current economic landscape.
In other recent news, DXC Technology reported its fourth-quarter fiscal 2025 earnings, revealing an earnings per share (EPS) of $0.84, which surpassed the forecasted $0.76. The company’s revenue also exceeded expectations, reaching $3.17 billion compared to the anticipated $3.14 billion. Despite these positive results, the company’s stock faced a significant drop of 13.52% in aftermarket trading. Analysts from Stifel and Morgan Stanley (NYSE:MS) adjusted their price targets for DXC Technology, with Stifel lowering its target from $24.00 to $15.00, and Morgan Stanley reducing its target from $22.00 to $16.00. Both firms maintained their respective ratings, with Stifel holding a Hold rating and Morgan Stanley keeping an Equalweight rating. The adjustments reflect concerns over DXC Technology’s guidance for fiscal year 2026, which predicts a decline in revenue and challenges in its Global Infrastructure Services (GIS) and Global Business Services (GBS) segments. DXC Technology is focusing on reversing its revenue decline and enhancing its capabilities in artificial intelligence, as stated by CEO Raul Fernandez. The company also plans to restart its share repurchase program, emphasizing its commitment to long-term shareholder value.
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