Electronic Data Systems (EDS) posts 9 cents second-quarter pro forma earnings per share. Jefferies upgraded the stock to hold from underperform.
Analyst Joseph Vafi says that clearer signs of a recovery and positive momentum have begun to manifest themselves in EDS' financial performance while nowhere near returning to being a growth engine. Second-quarter sales decline of 1% was in line with expectations.
Vafi raised his 34 cents 2005 EPS estimate to 54 cents, and gross margin estimate to 11.8% from 11%. He sees 2006 EPS of 93 cents on a sales decline of 2%; he notes continued margin recovery that should support a material earnings recovery, but it lost business with GM.
He foresees no new negative catalysts on horizon. He raises price target to $22 from $18.