A month has gone by since the last earnings report for Amdocs (DOX Quick QuoteDOX - Free Report) . Shares have added about 4.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Amdocs Q2 Earnings Beat Estimates, Revenues Match

Amdocs reported better-than-expected results for the second quarter of fiscal 2023.

The company reported second-quarter non-GAAP earnings of $1.47 per share, which surpassed the Zacks Consensus Estimate of $1.46 and came within management’s guidance range of $1.44-$1.50. However, quarterly non-GAAP earnings dropped 4.5% from the year-ago quarter’s earnings of $1.54 per share.

Amdocs reported record revenues of $1.22 billion, which matched the consensus mark and were more than the midpoint of management’s guidance range of $1.200-$1.240 billion. Compared with the year-ago quarter, revenues were up 6.8% on a reported basis and 8.2% on a constant-currency basis.

Quarterly Details

Amdocs’ top-line performance was primarily driven by continued strength in North America and healthy activity levels among top consumers in Europe. However, foreign currency movements subdued the figure.

North America reported record revenues of $829 million (67.8% of the total revenues), highlighting a 7.4% year-over-year increase. Europe revenues (14.1% of the total revenues) of $171.7 million increased 16.6% year over year. Rest of the World revenues (18.2% of the total revenues) fell 1.5% year over year to $222.6 million.

Managed services revenues grew 8.4% year over year to $718.9 million. The company ended the second quarter of fiscal 2023 with a 12-month backlog of $4.11 billion, up $20 million sequentially and $220 million year over year.

The non-GAAP operating income increased 8% year over year to $217.7 million, while the operating margin expanded 20 basis points to 17.8%. The year-over-year improvement in the non-GAAP operating margin was mainly driven by the company’s consistent project execution and ongoing efficiency gains.

Balance Sheet and Cash Flow

Amdocs had cash and short-term investments of $861.6 million as of Mar 31, 2023 compared with $734.6 million as of Dec 31, 2022.

In the second quarter of fiscal 2023, net cash provided by operating activities was $294.4 million, up from $83.2 million in the previous quarter and $168.9 million in the year-ago period. Free cash flow was $259.4 million compared with the previous quarter’s $49.5 million and the year-earlier quarter’s $121.6 million.

During the first half of fiscal 2023, net cash provided by operating activities was $377.7 million and free cash flow was $308.9 million.

In the fiscal second quarter, the company repurchased shares worth $106 million and paid out $47.7 million in dividends. Amdocs’ board approved the new increased quarterly cash dividend rate of 43.5 cents per share. The dividend will be paid out on Jul 28, 2023, to shareholders of record as of Jun 30.

FY23 Guidance Update

For fiscal 2023, the company now anticipates revenue growth of 6-8% on a reported basis, tightened from the previous guidance range of 5-9%. On a constant-currency basis, revenues are projected to increase in the band of 7-9% year over year compared with previously estimated 6-10% band.

The updated fiscal 2023 outlook reflects an expected unfavorable foreign currency impact of approximately 1% on a year-over-year basis consistent with the previous forecast. Adjusted earnings are still estimated to grow between 9% and 13%.

For the third quarter of fiscal 2023, the company projects revenues between $1.215 billion and $1.255 billion and adjusted earnings in the range of $1.45-$1.51 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Amdocs has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Amdocs has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Amdocs is part of the Zacks Computers - IT Services industry. Over the past month, CDW (CDW Quick QuoteCDW - Free Report) , a stock from the same industry, has gained 1.5%. The company reported its results for the quarter ended March 2023 more than a month ago.

CDW reported revenues of $5.1 billion in the last reported quarter, representing a year-over-year change of -14.2%. EPS of $2.03 for the same period compares with $2.20 a year ago.

CDW is expected to post earnings of $2.35 per share for the current quarter, representing a year-over-year change of -5.6%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.2%.

CDW has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.