BMO Capital Offers Commentary on Computer Sciences Corporation on Back of Government Services Unit And SRA Combination

In a research report published Tuesday, BMO Capital analyst Keith Bachman reiterated a Market Perform rating on shares of Computer Sciences Corporation (NYSE:CSC) with a price target of $72, after the company announced that it has entered into an agreement to combine its government services unit, CSGov, with SRA, a provider of government IT services to national security, health and civil market segments.

Bachman noted, “We believe that CSGov and SRA have complementary capabilities and offerings including cloud computing, cyber security, and IT infrastructure, and minimal overlap between client’s backlog and pipeline. We note that CSGov will provide strength in national security markets while SRA has expertise in health & civil markets. Given its scope and scale, we think the new entity should be better positioned to capitalize on growth opportunities as government agencies look to shift towards next generation IT services and combating cybersecurity threats. Net, we think this deal is a positive for CSC’s positioning in a consolidating market.”

“We currently forecast CSGov to grow 0.2% and 2.5% during FY2016E and FY2017E, respectively. Further, CSC estimates that the deal will generate ~$50 million of cost synergies, mainly from shared G&A. Including synergies, we believe that SRA could contribute an additional $0.65 of EPS in FY2017 for CSC vs our current forecast of $5.30,” the analyst added.

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Keith Bachman has a total average return of 20.2% and a 63.6% success rate. Bachman is ranked #45 out of 3742 analysts.

Out of the 7 analysts polled by TipRanks, 5 rate Computer Sciences Corp. stock a Hold, while 2 rate the stock a Buy. With a return potential of 17%, the stock’s consensus target price stands at $71.33.

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