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MAXIMUS (MMS) Falls 3.9% Despite Beating on Q2 Earnings

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MAXIMUS, Inc. (MMS - Free Report) reported better-than-expected second-quarter fiscal 2021 results. However, strong results failed to impress the market as the stock has plunged 3.9% since earnings release on May 6.

Earnings per share (EPS) in the second quarter amounted to $1.29, which surpassed the Zacks Consensus Estimate by 57.3% and surged more than 100% year over year. The bottom line was primarily driven by surge in operating income.

Revenues of $959.3 million beat the consensus mark by 15.7% and increased 17.3% year over year. The uptick was driven by new COVID-19 response work such as vaccination distribution support services, unemployment insurance program support, disease investigation, contact tracing and other key initiatives.

Shares of MAXIMUS have gained 37.6% in the past year compared with 29% growth of the industry it belongs to.

Segmental Revenues

U.S. Services segment revenues of $448.2 million increased 45% (all organic) year over year, mainly owing to new work. The uptick was primarily driven by an estimated $175 million of COVID-response work.

U.S. Federal Services segment revenues of $330.1 million plunged 16.1% from the year-ago quarter’s reported figure. The downtick was due to decline in census contract revenues.

Outside the U.S. segment, revenues of $180.9 million increased 55.9% year over year on a reported basis. This segment realized growth driven by efficient operations in Australia, where market conditions continued to create and sustain job opportunities.

Sales and Pipeline

Year-to-date signed contract awards at Mar 31, 2021, totaled $1.1 billion and contracts pending (awarded but unsigned) amounted to $1.3 billion. The sales pipeline at Mar 31, 2021, was $35.6 billion. This included $3.9 billion in proposals pending, $1.6 billion in proposals in preparation and $27 billion in opportunities tracking.

Operating Performance

Operating income of $113.2 million increased more than 100% year over year. Operating income margin of 11.8% surged 720 basis points (bps) year over year. Attain operations contributed $3 million to operating income.

Maximus, Inc. Price, Consensus and EPS Surprise

 

Maximus, Inc. Price, Consensus and EPS Surprise

Maximus, Inc. price-consensus-eps-surprise-chart | Maximus, Inc. Quote

 

Balance Sheet and Cash Flow

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $101.7 million compared with $132.6 million in the prior quarter. The company generated $181.6 million of cash from operations. Free cash flow is $167.1 million. MAXIMUS paid out dividends of $17.2 million.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Raised 2021 Outlook

For the second consecutive quarter, Maximus is increasing revenues, earnings and cash flow guidance for fiscal 2021 due to recent awards, scope increases as well as contract extensions related to COVID-19 response work.

MAXIMUS expects EPS in the range of $4.20-$4.40 (previous outlook: $3.55-$3.75). The Zacks Consensus Estimate is pegged at $4.12 per share.

It expects revenues in the range of $4.0-$4.2 billion (previous outlook: $3.40-$3.52 billion). The Zacks Consensus Estimate for the same is pegged at $3.89 milllion.

Cash flows from operations are expected between $400 million and $450 million (previous guidance: $350 million and $400 million). Free cash flow is anticipated in the range of $360-$410 million (previous guidance: $310 million and $360 million).

Effective tax rate is anticipated to range between 26% and 27% and weighted average shares outstanding to range between 62.2 million and 62.3 million.

Performance of Other Business Services Companies

Equifax’s (EFX - Free Report) first-quarter 2021 adjusted earnings of $1.97 per share beat the Zacks Consensus Estimate by 29.6% and increased on a year-over-year basis. Revenues of $1.21 billion outpaced the consensus mark by 7.9% and rose 26.6% year over year on a reported basis as well as on a local-currency basis.

Robert Half’s (RHI - Free Report) first-quarter 2021 earnings of 98 cents per share beat the consensus mark by 22.5% and were up 24.1% year over year. Revenues of $1.4 billion surpassed the consensus mark by 3.3%, but declined 7.2% year over year on a reported basis and 7.6% on an adjusted basis.

Omnicom’s (OMC - Free Report) first-quarter 2021 adjusted earnings of $1.33 per share beat the consensus mark by 16.7% and increased 11.8% year over year. Total revenues of $3.4 billion surpassed the consensus estimate by 3.6% and increased marginally year over year.

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