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Amdocs (DOX) Q2 Earnings In Line, Revenues Beat Estimates

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Amdocs Limited (DOX - Free Report) reported second-quarter fiscal 2018 results, where both the top and the bottom line figures improved year over year.

Quarterly adjusted earnings came in at 95 cents per share compared with 94 cents in the year-ago quarter. Adjusted earnings matched the Zacks Consensus Estimate.

Revenues in the reported quarter came in at $992.3 million, surpassing the Zacks Consensus Estimate of $981 million. The top line came in 2.7% higher than the year-ago figure.

Top-Line Details

Customer Experience Solutions revenues were up 3.4% and reached $980.7 million in the reported quarter. Customer Experience Directory revenues were down 33.3% year over year to $11.6 million.

Geographically, revenues from North America were $626.2 million, down 1.6% from the year-ago period. Europe recorded revenues of $148.6 million, up 28.8% year over year. Rest of the World generated revenues of $219.5 million, up 2.4% year over year.

Management noted that lower spending from the company’s largest customer, AT&T (T - Free Report) negatively impacted North American revenues in the recently reported quarter.

Nevertheless, management is optimistic about the double-digit growth in the contribution of European revenues and the 12-month backlog that reached $3.32 billion at the end of the quarter.

Margins

The company reported non-GAAP operating expenses of $820.6 million, up 2.6% from the year-ago quarter. Non-GAAP operating income increased 3.5% and came in at $171.8 million. Operating margin increased 10 basis points (bps) from the year-ago quarter.  

Balance Sheet & Cash Flow

Exiting the reported quarter, Amdocs had cash and cash equivalents of $470.93 million compared with $649.61 million recorded in the prior quarter.

Notably, the company completed the acquisitions of Vubiquity and UXP Systems during the quarter and expects the acquisitions to benefit financials from the current quarter onward.

In the first six months of fiscal 2018, the company generated net cash of $278.3 million from its operating activities compared with $275.4 million cash generated in the year-earlier period.

During the reported quarter, the company repurchased shares worth $120 million. Also, its board of directors approved the payment of a quarterly dividend of 25 cents per share. The dividend will be paid on Jul 20 to shareholders on record as of Jun 29.

Outlook

Amdocs expects revenues in the range of $990-$1,030 million and adjusted earnings per share in the range of 71-81 cents in third-quarter fiscal 2018.

The company raised its revenue growth view for fiscal 2018. The company now expects revenues to grow 2.3%-4.3% from the year-ago quarter, up from the previous expectation of flat to 4% growth.

Fiscal 2018 earnings growth expectations were reiterated in the range of 4%-8%.

Conclusion

Amdocs’ management is extremely positive about the acquisitions of Vubiquity and UXP Systems, which are expected to enrich its offerings and cater to a larger market. This will eventually be beneficial for the company’s top line. Notably, management provided guidance for the third quarter and fiscal 2018 considering the positive impact of the acquisitions.

They are also banking on the recently launched AmdocsOne for future growth. Additionally, increasing investments in NFV and Pay TV and further digital modernization are tailwinds for Amdocs.

Zacks Rank and Stocks to Consider

Amdocs currently has a Zacks Rank #2 (Buy).

Some of the better-ranked stocks in the broader technology sector are Micron Technology, Inc. (MU - Free Report) , Twitter, Inc. (TWTR - Free Report) both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term EPS growth rates for Micron and Twitter are projected to be 10% and 23.1% respectively.

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