A month has gone by since the last earnings report for Amdocs (
DOX Quick Quote DOX - Free Report) . Shares have added about 2.7% 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 catalysts.
Amdocs’ Q3 Earnings and Revenues Top Estimates, Up Y/Y
Amdocs reported solid third-quarter fiscal 2021 results on Wednesday, wherein its revenues and earnings surpassed the respective Zacks Consensus Estimate and marked significant year-over-year improvements. The company reported third-quarter non-GAAP earnings of $1.35 per share, which beat the consensus mark of $1.18 and came way higher than management’s previous guided range of $1.14-$1.20.
The bottom-line results also marked a year-over-year improvement of 26.2%, mainly driven by increased revenues, efficient cost management and benefits from the favorable impact of certain tax-optimization strategies across some of its operating jurisdiction.
Revenues of $1.07 billion marginally outpaced the consensus mark of $1.06 billion and came in above the mid-point of its earlier guided range of $1.04-$1.08 billion. Compared with the year-ago quarter, revenues were up 3.9% on a reported basis and 1.9% on a constant currency basis.
The year-over-year increase in the top line reflects benefits from accelerated multi-year investments around 5G modernization and cloud migration by customers. Positive impact of favorable foreign-currency fluctuations of approximately $3 million also boosted quarterly revenues.
North America revenues (64.3% of total revenues) of $686.1 million remained flat, year over year.
Europe revenues (14.6% of total revenues) of $155.7 million increased 7.1%, year over year. Rest of the World revenues (21.1% of total revenues) grew 15.2%, year over year, to $224.5 million.
Managed services revenues climbed 7.6%, year over year, to $650.5 million.
The company ended the fiscal third quarter with a 12-month backlog of $3.59 billion, up $50 million, sequentially, and 10.8%, year on year.
Non-GAAP research & development expenses, as a percentage of revenues, expanded 70 basis points (bps) on a year-over-year basis to 7.5%.
However, non-GAAP selling, general & administrative expenses, as a percentage of revenues, flared up 60 bps year over year to 10.8%.
Operating margin expanded 50 bps year over year to 17.6%.
Balance Sheet and Cash Flow
Amdocs had cash and short-term investments of $1.05 billion as of Jun 30, 2021, compared with $1.16 billion as of Mar 31, 2021.
Net cash provided by operating activities was $189.9 million, down from the $536.2 million recorded in the previous quarter and up from the $186.7 million seen in the year-ago period.
Free cash flow was $139.6 million compared with the previous quarter’s $133 million and the year-earlier quarter’s $145.4 million.
During the fiscal third quarter, the company repurchased shares worth $90 million. Amdocs’ board also approved a quarterly cash dividend payment of 36 cents per share. The dividends will be paid out on Oct 29 to the shareholders of record date as of Sep 30, 2021.
Buoyed by the better-than-expected fiscal third-quarter results, Amdocs raised its fiscal 2021 outlook. The company now anticipates revenues of 2.3-3.3% compared with the previous forecast of1-4%. At cc, revenues are projected to grow in the band of 1.3-2.3% year over year versus the earlier projection of 0-3%.
The updated fiscal 2021 outlook continues to reflect the divestiture of the OpenMarket business and positive foreign-currency impact of 1%.
Adjusted earnings are now estimated to grow between 7.6% and 9%, up from the 6-9% projected earlier.
For the fiscal fourth quarter, the company projects revenues between $1,065 million and $1,105 million and adjusted earnings in the range of $1.13-$1.19 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -7.5% due to these changes.
Currently, Amdocs has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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.