NEW YORK, March 9 (Reuters) - Fitch Ratings on Friday cut its ratings on Computer Sciences Corp. CSC.N, citing slower revenue growth due to weakness in commercial contract signings and falling cash flow.
Computer Sciences said last month that its fiscal third-quarter net profit fell to $114.3 million, or 65 cents per share, from $203.5 million, or $1.08 per share, a year earlier. For details, see [ID:nN06365337]
The ratings cut reflects “continued weakness in commercial contract signings that has weighed on overall revenue growth, as the commercial segment accounted for 64 percent of total revenue in the latest 12 months, ended Dec. 29, 2006,” Fitch said in a statement.
The cut also reflects falling cash flow from operations, which went into negative territory in the first fiscal quarter of 2007 for the first time in five years, Fitch said. The ratings incorporate the possibility of additional shareholder-friendly actions, such as debt-financed share buybacks.
Fitch cut Computer Sciences’ senior unsecured debt one notch to “A-minus,” its seventh highest investment grade ranking, from “A.” The outlook is stable, indicating an additional ratings change is not expected over the next one to two years.
Spreads of Computer Sciences’ 7.375 percent bond due 2011 last traded at 0.87 percentage point over Treasuries on Thursday, according to MarketAxess.