Dividend Helps Soften Earnings Blow for CA Technologies (CA)

The ill winds of earnings disappointments in the tech sector continued today with investors finding little shelter. CA Technologies (NASDAQ: CA) released second-quarter results this afternoon that gave little comfort to shareholders battered by the earnings season storm. The company reported flat revenues on a constant currency basis and a profit of $0.59 per share, which matched the forecasts of Wall Street analysts. However, the look into the near future rattled investors.

For the full year, CA Technologies sees revenues declining by 1% to 3%, where management saw sales growing by 2% to 4% just two quarters ago. For the full year, the company guided profit expectations down from a range of $2.45-$2.50 to $2.36-$2.45. Wall Street analysts were looking for $2.48 per share.

Commenting on the results, Chief Executive Officer Bill McCracken said, “Our performance was also affected by the weakening global economy, which elongated sales cycles.” He also noted that management had anticipated a weak quarter.

This afternoon, analysts at Zacks reissued their neutral rating on the stock with a $26.00 price target.

CA Technologies shares joined the parade of tech stocks experiencing heavy selling on the opening bell. Shares of the enterprise information technology company gapped down $1.50 from the closing price yesterday to begin the session at $23.40. An early morning bounce moved the stock to an intraday high of $23.78. Sellers then drove share prices to the lows of the day in the first 90 minutes of trading when the stock traded for $22.50. For the remainder of the day, buyers and sellers played to a stalemate with shares trading near the day’s low. The stock ended the session with a loss of over 8% to close the final day of the trading week down $2.17 at $22.73.  The number of shares traded on the day equaled 15 million shares, or roughly five times the number exchanged on an average day.

Even though shares of CA Technologies sold off hard today, some may ask why it was not as bad as some of the declines seen this week when companies failed to meet the expectations of analysts. The answer could lie in the dividend the company pays. The stock pays a quarterly dividend of $0.25 per share or $1.00 for the year, which gives investors a yield of almost 4.4% at current prices.

The 52-week low for CA shares was established last November when the stock traded for $19.54. Aided by a solid earnings report and forecast in January, shares climbed 40% through March to a 12-month high of $28.00. Until today, the stock traded in a range between the annual high and $24.00 over the last six months. Traders will have the weekend to figure out what breaching the lower boundaries of the trading range says about future share prices.

Ten out of 13 analysts covering the company have a “hold” rating on the stock. The consensus view places a $27.78 price target for CA shares.

CA Technologies is an enterprise information technology management and software company. The Islandia, NewYork, company has three operating segments: Mainframe Solutions, Enterprise Solutions and Services. The company was founded in 1974.

 

 

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).

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