DXC Technology Company

 

DXC Details
 
DXC Selected by Federal Life Insurance: DXC Technology Company (NASDAQ: DXC) is a cloud-based service provider of innovative Information Technology, boosting data and providing security and scalability to its users. On 28 April 2020, the company stated thatit has been selected by Federal Life Insurance Company to develop life and health policy purchasing capabilities for both customers and agents. This, in turn, will simplify key processes and propel business prospects. 
 
DXC Prices Senior Notes: In another update, DXC stated that it has priced $500 million aggregate principal amount of senior notes due 2023. The notes carry an interest rate of 4.000%. Additionally, the company also priced $500 million aggregate principal amount of senior notes due 2025, with an interest rate of 4.125%.
 
DXC Completes CMORE Buyout: Recently, the company stated that Luxoft, a software engineering arm of DXC has finalized the buyout of mobility systems developer, CMORE Automotive, for an undisclosed amount. The move will help DXC to boost its competencies in the Autonomous Drive /Advanced Driver Assistance Systems programs.
 
Q3FY20 Operating Highlights for the Period ended 31st December 2019:  During the quarter, the company reported revenue of $5,021 million, down ~3% on pcp. Global Business Services provided a revenue growth of ~8.8%, while Global Infrastructure Services reported a decline in revenue of ~11.5% on pcp.
 

Revenue Highlights (Source: Company Reports)
 
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales based relative valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of DXC closed at $17.65 with a market capitalization of $4.5 billion. The stock made a 52-week low and high of $7.90 and $60.80 and is currently trading at the lower band of the range. The stock corrected by 46.02% and 70.73% in the last three months and one year, respectively. However, in the last one month, the stock ran up 11.71%. The company remains on track to benefit from continued strength in the Digital business. Moreover, the buyout of Luxoft business is expected to be a key growth driver. Considering the aforesaid facts, current trading levels and recent price movements, we have valued the stock using an EV/sales multiple based illustrative relative valuation method and arrived at a target price of lower double-digit (in % terms). For the purpose, we have taken the peer group - Cognizant Technology Solutions Corp (NASDAQ: CTSH), Xerox Holdings Corp (NYSE: XRX), and Unisys Corp (NYSE: UIS). Hence, we recommend a ‘Buy’ rating on the stock at the closing price of $17.65, up 1.85% as on 8 May 2020.

 
DXC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
 

Exelon Corporation

 

EXC Details
 
Cost Cutting Initiatives Remains a Key Positive: Exelon Corporation (NASDAQ: EXC) operates in utility services and is involved in the generation, delivery, and marketing of energy.
 
Q1FY20 Key Operational Highlights for the Period Ended 31 March 2020: EXC declared its quarterly results, wherein the company reported total operating revenue at $8,747 million as compared to $9,477 million in 1QFY19. The company reported net income at $376 million as compared to $966 million in the previous corresponding quarter. The company’s total operating expenses decreased from $8,262 million reported in 1QFY19 to $7,529 million in 1QFY20, on the back of lower purchased power and fuel costs. The company exited the period with a cash balance of $1,457 million and long-term debt of $34,808 million. During the quarter, cash inflow from operating activities amounted to $1,080 million.
 
 

Q1QFY20 Income Statement Highlights (Source: Company Reports)
 
Other Recent Updates: In a recent update, the company stated that its six Illinois nuclear plants securely achieved refueling outages during the COVID-19 outbreak.The move aided necessary measures to keep workers safe and virus-free in Braidwood, Byron, LaSalle, and Quad Cities. EXC also donated ~$2 million to the Illinois COVID-19 Response Fund, to provide aid to Illinois citizens during the current crisis.
 
 Guidance: The company lowered its FY20 operating earnings outlook from $3.00-$3.30 per share to the range of $2.80-$3.10 per share. The company anticipates $250 million in cost savings across its operating companies to partly offset the projected adverse impacts on operating revenues.
 
Valuation Methodology:P/E Multiple Based Relative Valuation (Illustrative)

P/E based relative valuation (Source: Refinitiv, Thomson Reuters)
 
 Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of EXC is quoting at $37.44 with a market capitalization of $36.5 billion. The stock is quoting at the lower band of its 52-week trading range of $29.28 - $51.18. The stock corrected by 22.33% and 22.95% in the last three months and one year, respectively. The company remains on track to spend $26 billion to strengthen its capabilities, thereby improving reliability and resilience. We have valued the stock using a P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of lower double-digit (in % terms). For the purpose, we have taken the peer group - Southern Co (NYSE: SO), Entergy Corp (NYSE: ETR), and Public Service Enterprise Group Inc (NYSE: PEG). Looking at the current trading levels, cost saving initiatives and business prospects, we recommend a ‘Buy’ rating on the stock at the closing price of $37.44, up 6.85% as on 08 May 2020.
 
 
EXC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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