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MAXIMUS (MMS) Rides on Government Contracts, Debt Woe Stays
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MAXIMUS, Inc.’s (MMS - Free Report) top line is currently benefiting from the census contract in the U.S. Federal Services Segment and new COVID-19 response work such as contact tracing as well as assistance with unemployment benefits. The company’s shares have gained 11% over the past three months.
MAXIMUS recently reported better-than-expected third-quarter fiscal 2020 results. Earnings of $1.04 per share surpassed the Zacks Consensus Estimate by 33.3% and rose 7.2% year over year. Revenues of $901.3 million beat the consensus mark by 11% and increased 23.4% year over year.
Company is a Lucrative Partner to Governments
With more than 40 years of experience, MAXIMUS has grown to be a leading operator of government health and human-services programs globally. The company’s business-process management expertise and ability to deliver cost-effective, efficient and high-scale solutions position it as a lucrative partner for governments.
MAXIMUS maintains solid relationships and strong reputation with governments, and long-term contracts provide it with predictable recurring-revenue streams.
A Consistent Dividend Payer
Although many companies across diverse sectors have suspended dividend payouts amid the coronavirus crisis, MAXIMUS remains one of those few that are sailing through the tough economic time and maintaining dividend payouts as well. The company announced a quarterly cash dividend of 28 cents in May and August.
MAXIMUS has a track record of consistent dividend payment. During fiscal 2019, the company paid cash dividends of $63.9 million. It paid $11.7 million dividends to its shareholders during each of the fiscal years 2018, 2017 and 2016.
A Weak Segment and Leveraged Balance Sheet Are Overhangs
Poor performance of the Outside the U.S. segment has been weighing on MAXIMUS’ top line and margins for quite some time. The segment’s revenues declined 22.5% year over year in the third quarter of fiscal 2020, with the operating loss amounting to $5.8 million. However, the segment’s operating profit was $5.0 million in the year-ago quarter.
The company’s cash and cash equivalent of $82 million at the end of third-quarter fiscal 2020 was well below the $145 million long-term debt level, underscoring that the company doesn’t have enough cash to meet this debt burden. The cash level, however, can meet the short-term debt of $7 million.
The long-term expected earnings per share (three to five years) growth rate for Republic Services, IQVIA Holdings and NV5 Global are 6.6%, 9.9% and 13.7%, respectively.
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MAXIMUS (MMS) Rides on Government Contracts, Debt Woe Stays
MAXIMUS, Inc.’s (MMS - Free Report) top line is currently benefiting from the census contract in the U.S. Federal Services Segment and new COVID-19 response work such as contact tracing as well as assistance with unemployment benefits. The company’s shares have gained 11% over the past three months.
MAXIMUS recently reported better-than-expected third-quarter fiscal 2020 results. Earnings of $1.04 per share surpassed the Zacks Consensus Estimate by 33.3% and rose 7.2% year over year. Revenues of $901.3 million beat the consensus mark by 11% and increased 23.4% year over year.
Company is a Lucrative Partner to Governments
With more than 40 years of experience, MAXIMUS has grown to be a leading operator of government health and human-services programs globally. The company’s business-process management expertise and ability to deliver cost-effective, efficient and high-scale solutions position it as a lucrative partner for governments.
MAXIMUS maintains solid relationships and strong reputation with governments, and long-term contracts provide it with predictable recurring-revenue streams.
A Consistent Dividend Payer
Although many companies across diverse sectors have suspended dividend payouts amid the coronavirus crisis, MAXIMUS remains one of those few that are sailing through the tough economic time and maintaining dividend payouts as well. The company announced a quarterly cash dividend of 28 cents in May and August.
MAXIMUS has a track record of consistent dividend payment. During fiscal 2019, the company paid cash dividends of $63.9 million. It paid $11.7 million dividends to its shareholders during each of the fiscal years 2018, 2017 and 2016.
A Weak Segment and Leveraged Balance Sheet Are Overhangs
Poor performance of the Outside the U.S. segment has been weighing on MAXIMUS’ top line and margins for quite some time. The segment’s revenues declined 22.5% year over year in the third quarter of fiscal 2020, with the operating loss amounting to $5.8 million. However, the segment’s operating profit was $5.0 million in the year-ago quarter.
The company’s cash and cash equivalent of $82 million at the end of third-quarter fiscal 2020 was well below the $145 million long-term debt level, underscoring that the company doesn’t have enough cash to meet this debt burden. The cash level, however, can meet the short-term debt of $7 million.
Zacks Rank and Key Picks
Currently, MAXIMUS has a Zacks Rank # 3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are Republic Services (RSG - Free Report) , IQVIA Holdings (IQV - Free Report) and NV5 Global (NVEE - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected earnings per share (three to five years) growth rate for Republic Services, IQVIA Holdings and NV5 Global are 6.6%, 9.9% and 13.7%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>