EDS Profit Leaps on Growth in Contract Revenue

Ron Heflin

The entrance to Electronic Data System headquarters building in Plano, Texas, Tuesday, Nov. 1, 2005. On Tuesday EDS posted a narrow third-quarter profit and reported that new contract signings, an indicator of future revenue, nearly doubled from a year ago. (AP Photo/Ron Heflin)

Electronic Data Systems, the world's second-largest technology services company, reported a sharply higher quarterly profit as revenue from contracts increased.

Net income advanced to $164 million, or 31 cents a share, from $24 million, or 5 cents a share, a year earlier, while revenue rose to $5.22 billion from $5.08 billion.

Analysts, on average, had forecast earnings before items of 21 cents a share and revenue of $5.26 billion, according to Reuters Estimates.

EDS , which is No. 2 in computer services behind IBM , has been lifting profits by cutting expenses, including 5,000 jobs last year, and generating revenue from contracts. Last year it signed a $9.9 billion deal to operate the U.S. Navy's computer network.

EDS said on Thursday it expects second-quarter earnings per share before items of 22 cents to 27 cents and revenue of $5.3 billion to $5.5 billion. The Plano, Texas-based company forecast full-year earnings per share before items of $1.55 to $1.60 and revenue of $22.0 billion to $22.5 billion.

Analysts have been forecasting second-quarter earnings of 33 cents a share before items and revenue of $5.45 billion. They expect full-year earnings a share of $1.57 before items and revenue of $22.2 billion.

The stock is up 7% this year, partly on speculation it may be a buyout candidate.

EDS shares trade at about 19 times estimated 2007 earnings per share, compared with the IBM's multiple of about 15.