A month has gone by since the last earnings report for Amdocs (DOX - Free Report) . Shares have lost about 6.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Amdocs due for a breakout? 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 drivers.
Amdocs Reports Q4 Results
Amdocs reported fourth-quarter fiscal 2018 results, wherein the bottom line beat the Zacks Consensus Estimate and the top line matched the same.
Quarterly non-GAAP earnings came in at 99 cents per share compared with 94 cents in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of 98 cents.
Revenues in the reported quarter came in at $1 billion matching the Zacks Consensus Estimate and marking year-over-year improvement of 2.3%.
Continued flow of new customers, penetration into new regions and a number of awards for projects and managed services drove revenue growth. However, a sequential impact of nearly $5 million in foreign currency movements was a dampener.
Fiscal 2018 Results
Revenues for the full fiscal year came in at $3.97 billion compared with $3.87 billion a year ago. Non-GAAP earnings per share for fiscal 2018 were up 6.1% year over year to $4.03.
Non-GAAP Operating income was $687 million, up 3.3% year over year.
In fiscal 2018, the company generated net cash of $557.2 million from its operating activities compared with $636.1 million in fiscal 2017.
Customer Experience Systems revenues were up 2.6% and reached $992.5 million in the reported quarter. Customer Experience Directory revenues were down 15.8% year over year to $10.1 million.
Geographically, revenues from North America (64% of total) were $644.8638.2 million, down 0.9% from the year-ago quarter due to customer fluctuations. Europe (15%) recorded revenues of $150.6 million, up 16%, marking the best quarter in more than 10 years. Rest of the World (21%) generated revenues of $213.8 million, up 3.9%.
During the quarter, Amdocs bagged its first transformation award with Italian telecommunications provider TIM. This further boosted its foothold in Europe.
Moreover, it entered into a six-year deal with PLDT (PHI) on managed IT infrastructure. With this agreement, Amdocs expanded its association with the telecom company with which it had already signed a $300 million managed transformation deal earlier this year.
Management is optimistic about the 12-month backlog that reached $3.336 billion at the end of the quarter. The company continued to aid digital, media and network transformations of its clients, which improved its revenue growth rate.
The company’s recent partnership with Comcast (CMCSA), which was materialized in the fourth fiscal quarter, is expected to help drive software defined wide area networks (SD-WAN) service.
Margins and Operating Metrics
The company reported non-GAAP operating expenses of $829.98 million, up 2.3% from the year-ago quarter.
Non-GAAP operating income increased 2.6% and came in at $172.61 million.
Operating margin of 17.2% for the quarter remained flat year over year.
Balance Sheet & Cash Flow
As of Sep 30, 2018, Amdocs had cash, cash equivalents and short-term interest-bearing investments of $519.2 million compared with $979.6 million recorded in the prior quarter.
During the reported quarter, the company repurchased shares worth $90 million. Also, its board of directors approved the payment of a quarterly dividend of 25 cents per share. The dividend will be paid on Jan 18, 2019.
For first-quarter fiscal 2019, Amdocs expects revenues in the range of $990-$1,030 million and adjusted earnings per share in the range of 95 cents to $1.01.
For fiscal 2019, the company expects revenues to grow 1-5% year over year on a reported basis and 2-6% on constant currency basis. This guidance takes into account the impact of foreign exchange fluctuations.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -6.87% due to these changes.
Currently, Amdocs has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Amdocs has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.