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Computer Sciences Misses Estimates; Shares Tumble 7.4%

Free cash flow is off, analysts say. The company has a contract to train Iraqi police.

August 14, 2003|From Bloomberg News

Shares of Computer Sciences Corp., which is helping to train Iraq's new police force, fell 7.4% on Wednesday after the company missed some cash flow estimates and a Goldman Sachs Group Inc. analyst cut his stock rating.

Analyst Greg Gould trimmed his rating on the El Segundo-based company to "in-line" from "outperform," writing in a note to clients that the stock is expensive after a 28% price increase since May 14. The shares closed Tuesday at a 52-week high.

Two other analysts, Adam Frisch of UBS Warburg and Rod Bourgeois of Sanford C. Bernstein & Co., said the company's fiscal first-quarter free cash flow missed their forecasts. Free cash flow, or cash from operations minus spending on equipment and offices, is key for services companies because the biggest contracts require up-front investments of millions of dollars.

Computer Sciences burned through $338.7 million in the quarter ended July 4, 41% more than a year earlier. Bourgeois expected free cash flow to be little changed, he wrote in a note to clients. Free cash flow will be $200 million to $230 million this fiscal year, the company said Tuesday.

The company's shares fell $3.22, to $40.40, on the New York Stock Exchange. They fell 30% last year.

Computer Sciences manages computers for clients such as General Dynamics Corp. and the National Security Agency. Computer Sciences' Dyncorp unit in April won a U.S. State Department contract to hire 1,000 U.S. law enforcement officials who would develop an Iraqi police force.

On Tuesday, Computer Sciences said fiscal first-quarter net income rose 17% to $92.3 million, or 49 cents a share, from $79 million, or 46 cents, in the same period last year as sales to the U.S. government gained. Revenue rose 29% to $3.55 billion, boosted by the purchase of Dyncorp.

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