It has been about a month since the last earnings report for Amdocs (
DOX Quick Quote DOX - Free Report) . Shares have added about 4.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Amdocs due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Amdocs Q1 Earnings & Revenues Beat Estimates, Up Y/Y
Amdocs delivered first-quarter fiscal 2021 non-GAAP earnings of $1.16 per share. The reported figure beat the Zacks Consensus Estimate by 7.4% as well as increased 9.4% year over year.
Revenues of $1.09 billion also surpassed the consensus mark by 1% and went up 4.3% year over year. At constant currency (cc), revenues were up 3.7%.
North America revenues (64.8% of total revenues) grew 6.2% year over year to $703.4 million in the reported quarter. Moreover, Europe revenues (15.8% of total revenues) of $171.6 million increased 10.9% year over year.
However, Rest of the World revenues (19.4% of total revenues) declined 6.2% year over year to $211.3 million.
Managed services revenues climbed 7.6% year over year to $623.7 million.
The company ended the fiscal first quarter with a 12-month backlog of $3.49 billion, down 0.9% year over year.
Meanwhile, non-GAAP research & development expenses as percentage of revenues expanded 50 basis points (bps) on a year-over-year basis to 6.9%.
However, non-GAAP selling, general & administrative expenses as percentage of revenues shrunk 80 bps year over year to 10.6%.
Operating margin expanded 20 bps year over year to 17.3%.
Balance Sheet and Cash Flow
Amdocs had cash and short-term investments of $1.51 billion as of Dec 31, 2020, up from $983.9 billion on Sep 30, 2020.
Cash flow from operating activities was $416.5 million, up from the $204.7 million recorded in the previous quarter and $163.9 million seen in the year-ago quarter.
Free cash flow was $366 million compared with the previous quarter’s $145.4 million and the year-earlier quarter’s $105 million.
During the fiscal first quarter, the company repurchased shares worth $90 million and paid dividend of $43.1 million. Amdocs’ board also approved a 10% increase in quarterly cash dividend payment to 36 cents per share. The dividends will be paid out on Apr 23, 2021.
Amdocs updated the fiscal 2021 outlook to reflect the divestiture of the OpenMarket business. The company now anticipates revenues to be up in the range of negative 0.3% to positive 3.7% compared with the previous forecast of a 4-8% increase. At cc, revenues are projected to grow in the band of negative 1.5% to positive 2.5% versus the earlier projection of 3.5-7.5% growth. Nonetheless, the company has reiterated pro forma revenue growth of 3.5-7.5%.
Adjusted earnings are now estimated to grow between 4% and 8%, down from the 5-9% projected earlier. However, the company raised its pro forma non-GAAP earnings per share projection to 5.5-9.5% from 5-9% guided earlier.
The company expects free cash flow to be roughly $600 million, up from the $470 million anticipated previously. Normalized free cash flow is now estimated to be approximately $800 million, up from the earlier forecast of $62 million.
For the second quarter of fiscal 2021, revenues are expected between $1.015 billion and $1.055 billion.Non-GAAP earnings are projected at $1.09-$1.15 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Amdocs has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Amdocs has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.