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Amdocs (DOX) Up 1.9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Amdocs (DOX - Free Report) . Shares have added about 1.9% 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 drivers.

Amdocs Q4 Revenues Meet, Earnings Beat Estimates

Amdocs Limited reported decent fourth-quarter fiscal 2019 results, wherein the bottom line beat estimates and the top line matched the same.

Quarterly non-GAAP earnings per share came in at $1.08, up from 99 cents in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate of $1.07. The figure came within the company’s guided range of $1.04 to $1.10.

Revenues for the quarter came in at $1.03 billion, improving 2.8% year over year. The top line also came within the company’s guided range of $1.015 billion to $1.055 billion.

Stability in demand from North America and solid growth in Rest of the World and Europe drove the results. Moreover, continued flow of new customers, strong project execution and solid growth in managed services boosted revenues. However, a negative impact of nearly $3 million year over year in foreign currency movements was a headwind.

Quarter Details

Region wise, revenues from North America (62.5% of total revenues) were $644.2 million, up 0.9% from the year-ago quarter driven by digital modernization requirements of many of Amdocs’ communications, Pay TV and media customers. However, delayed merger of T-Mobile and Sprint was a dampener.

Performance in North America region was driven by stable activity trends at AT&T and healthy activity levels at many customers in the border region. The company extended its managed services agreement with U.S. Cellular for five years.

Europe (15.2%) recorded revenues of $156.1 million, up 3.7%. Rest of the World (22.3%) generated revenues of $230 million, up 7.6%.

Managed services continued to grow, driven by the managed transformation activities with new customers and multi-year extension of several pre-existing partnerships.

Moreover, strong traction was seen at Amdocs Media. Also, a new agreement with AT&T, T-Mobile's Metro pre-paid and Telkom South Africa were highlights of the quarter.

Operating Metrics

The company incurred non-GAAP operating expenses of $852.3 million, up 2.7% from the year-ago quarter.

Non-GAAP operating income increased 3.1% to $178 million.

Balance Sheet & Cash Flow

During the fiscal fourth quarter, the company repurchased shares worth $90 million. Also, its board of directors recently approved the payment of a quarterly dividend of $0.3275 per share. The dividend will be paid out in April 2020.

Full Fiscal-Year Highlights

Revenues for full fiscal 2019 came at $4.1 billion, 2.8% higher year over year driven by strong growth across each of its geographical regions. Moreover, strength in managed services, driven by the continued ramp up of managed transformation activities, was an upside.

However, a revenue decline of 12% at AT&T was a dampener.

Non-GAAP earnings grew 6.9% to $4.31.

Outlook

For first-quarter fiscal 2020, Amdocs expects revenues in the range of $1.015-$1.055 billion, assuming approximately $1 million sequential positive impact from foreign currency fluctuations, and a full-quarter revenue contribution from the TTS Wireless buyout.

Non-GAAP earnings per share in the band of $1.02 to $1.08 are expected for the fiscal first quarter. No impact of the acquisition of TTS Wireless on Amdocs’ non-GAAP earnings is expected.

For fiscal 2020, the company expects revenues to grow 1.5-5.5% year over year, with TTS contributing a little more than 1%. This guidance takes into account 0.5% year-over-year negative impact of foreign exchange fluctuations.

Amdocs expects non-GAAP earnings per share growth of 3-7% year over year, considering neutral contribution from TTS.

The company signed a large IT transformation project at Vodafone Germany in the ongoing quarter, along with another NFV deal with VodafoneZiggo. These deals are expected to improve its visibility among large service providers, thus attracting more deals.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Amdocs has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, 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 broadly trending downward for the stock, and the magnitude of this revision 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.


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