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Amdocs Upped to Buy, Greater Visibility Ahead

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Zacks Investment Research upgraded Amdocs Limited (DOX - Free Report) by a notch to a Zacks Rank #2 (Buy) on July 1, 2014. The shares of this leading provider of customer relationship management (CRM) and billing software to communications service providers have jumped more than 13% so far in the year.  

Amdocs’ business potential in the U.S. has gained greater visibility following the stabilization of its Business Support Systems (BSS) business with its major customer AT&T, Inc. (T - Free Report) and the renewal of long-term contracts with several leading telecom and cable TV operators. The company has also won significant managed service contracts in Europe despite the economic volatility therein. We believe that the long-term fundamentals of the company are intriguing given the transition of the telecom industry toward converged IP solutions.

Moreover, Amdocs is well positioned in the market where large carriers sell bundled and converged IP-based network solutions to their subscribers. These services include video, wireless, fixed-mobile converged and high-speed broadband Internet access solutions. With the network becoming increasingly complex, carriers have started spending more on customer care and billing software. Amdocs offers integrated customer management systems which help carriers counter customer churn.

Amdocs has the largest customer base and the broadest product line in the industry, including a full suite of end-to-end solutions for both Business Support Systems (BSS) and Operations Support Systems (OSS). The company’s total order backlog stood at nearly $2.94 billion at the end of the fiscal second quarter.

In the second quarter of fiscal 2014, the company reported earnings per share of 76 cents surpassing the Zacks Consensus Estimate of 73 cents. Earnings were also up 7.4% from the prior-year quarter. Total revenue came in at $896.9 million, up 7.7% year over year, exceeding the Zacks Consensus Estimate of $892 million.

Other Stocks Worth Considering

Other stocks also worth considering in the telecommunication sector are InterDigital, Inc. (IDCC - Free Report) and Science Applications International Corporation (SAIC - Free Report) . Both the stocks carry the same Zacks Rank as Amdocs.

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