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Computer Sciences (CSC) Upgraded To 'Buy' By Deutsche Bank; PT $46

 November 19, 2012 02:29 PM

(By Balachander) Computer Sciences Corp. (NYSE: CSC) shares were upgraded to "Buy" from "Hold" by Deutsche Bank analyst Bryan Keane, who cited faster-than-anticipated turnaround.

Keane, who set a price target of $46, believes the turnaround is happening faster and normalized EPS of $5.00+ will be reached earlier than expected (current valuation does not reflect future normalized earnings).

CSC currently trades at a significant discount to peers even at depressed EBITDA levels, the analyst said.

"We are raising our FY14 EPS est $0.29 to $3.51 (above Street) and issuing FY15 of $4.00, believing these figures could prove conservative," Keane wrote.

[Related -Computer Sciences Corporation (NYSE:CSC): CSC May Miss FY2014 Revenue Target]

"Although CEO Mike Lawrie (previously successful in turning around Misys) has only been on the job since March 2012, CSC's internal bleeding has stopped and credible turnaround plans are in place," the analyst said.

CSC is reducing headcount and bringing in new top management, with plans to reduce 50 percent of managerial levels (13 layers to 7-8), Keane said.

Troubled contracts (including UK NHS) have been identified, and considerable progress in profitability improvement for those contracts is being made, the analysts added.

The stock, which has been trading in the 52-week range of $22.18 to $37.80, rose 3.83 percent to trade at $35.79 on Monday.

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