Wang & Lee Group board approves 250-to-1 reverse share split
On Thursday, Morgan Stanley (NYSE:MS) maintained its Equalweight rating on DXC Technology (NYSE:DXC) but reduced the price target from $22.00 to $16.00. According to InvestingPro data, DXC appears undervalued at its current price of $16.56, with analysts’ targets ranging from $15 to $26. The adjustment comes amidst predictions of a year-over-year decline in fiscal year 2026 (FY26) revenue, factoring in foreign exchange and mergers and acquisitions headwinds. The firm’s revised model anticipates a 4.4% decline compared to the previous 2.4% forecast, aligning with the midpoint of management’s guidance.
Morgan Stanley’s analysis indicates that DXC Technology’s increased investment in talent and technology is expected to affect its adjusted EBIT margin, which is now projected at 7.3%, down from the prior estimate of 7.8%. This adjustment contributes to a lowered adjusted earnings per share (EPS) forecast of $3.07, a decrease from the previously estimated $3.33. InvestingPro analysis shows the company maintains a healthy current ratio of 1.34 and generates strong free cash flow, with a yield of 38% based on the last twelve months.
Looking ahead to fiscal year 2027 (FY27), the firm models a slight improvement over FY26 with a projected 3% year-over-year revenue decline and an adjusted EPS of $3.15. In light of these projections, Morgan Stanley has applied a 5x multiple to its revised FY27E Base Case EPS of $3.15, a decrease from the previous 6x multiple. This new multiple is notably more than one standard deviation below DXC’s two-year average forward price-to-earnings (P/E) multiple of 6x.
The analyst at Morgan Stanley acknowledged the progress DXC Technology has made but suggested that investors may remain on the sidelines until the company demonstrates a longer track record of consistency. The caution is partly due to DXC’s significant exposure to the ITO market, which is considered to be in secular decline. The firm’s stance remains neutral with the Equalweight rating, reflecting a wait-and-see approach regarding DXC Technology’s performance. InvestingPro subscribers have access to additional insights, including 7 more ProTips and a comprehensive analysis of DXC’s financial health, which currently rates as "FAIR" with a score of 2.47 out of 5.
In other recent news, DXC Technology Co. reported strong financial results for the fourth quarter of fiscal 2025, with earnings per share reaching $0.84, surpassing the forecast of $0.76. The company’s revenue also exceeded expectations, coming in at $3.17 billion against a projected $3.14 billion. Despite these positive financial outcomes, the company continues to face challenges, including an ongoing organic revenue decline of 4.2% for the quarter and 4.6% for the full year. The company is working to reverse eight consecutive years of revenue decline, with a strategic focus on enhancing AI capabilities. DXC Technology has announced plans to restart its share repurchase program, reflecting confidence in its long-term prospects. Additionally, the company has secured a significant contract with Carnival (NYSE:CCL) Cruise Line to manage its critical infrastructure, a testament to its capabilities in the technology sector. Analysts have noted the company’s strategic efforts, with firms like TD Cowen and Guggenheim Partners engaging in discussions about DXC’s future growth and investment strategies. The company projects an organic revenue decline of 3-5% for fiscal 2026, with an adjusted EBIT margin of 7-8%.
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