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Analyst Blog

On Aug 26, 2014, we issued an updated research report on Amdocs Ltd. (DOX - Analyst Report). The company has won important managed service contracts in the economically volatile European region. The company has also raised its guidance for the fourth quarter of fiscal 2014.
 
Amdocs has delivered positive earnings surprises in the last four quarters, with an average surprise of positive 4.08%. It also reported third-quarter 2014 results wherein the bottom line surpassed the Zacks Consensus Estimate while the top line was in line with the same. 
 
In the third quarter of 2014, the company’s Rest of the World and Europe segments reported double-digit revenue growth. Moreover, the company generated record high revenues in the reported quarter. Meanwhile, strong growth across North America and emerging markets has encouraged Amdocs to raise its revenue guidance for the fourth quarter.
 
Amdocs continues to expand its global client base through the signing of long-term contracts. Such deals will certainly boost the company’s top line. Recently, Telkom South Africa struck a four-year deal with Amdocs. 
 
Amdocs’ business opportunities in the U.S. are more visible after stabilization of businesses with AT&T Inc. (T - Analyst Report) and renewal of long-term contracts with several leading telecom and cable TV operators like Comcast Corp. (CMCSA - Analyst Report). Furthermore, it has signed a 5-year global managed services agreement with Vodafone Group plc. (VOD - Analyst Report) which should help the carrier enhance customer care and billing activities.
 
On the flipside, Amdocs is experiencing high customer concentration. Three major clients, namely, AT&T, Sprint and BCE Inc., together accounted for over 50% of the company’s total revenue. Thus, loss of any of these customers will result in significant top-line erosion. Moreover, an ongoing consolidation trend in the U.S. telecom industry may significantly affect the operations of the company going forward. Meanwhile, the stock price of Amdocs soared nearly 26% and is currently trading at a 52-week high range.
 
Amdocs currently has a Zacks Rank #2 (Hold).

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