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Maximus (MMS) Down 1.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Maximus (MMS - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Maximus due for a breakout? 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.

MAXIMUS Misses Q4 Earnings Estimates

MAXIMUS  reported dismal fourth-quarter fiscal 2019 results, with earnings and revenues missing the Zacks Consensus Estimate.

Earnings per share of 93 cents missed the consensus estimate of 94 cents but increased 27.4% year over year. Revenues of $755 million missed the consensus mark of $761 million but improved 35.2% year over year. The uptick in year over year results was mainly driven by the buyout of citizen engagement centers.

Management stated that the buyout allowed the company to build scale, expand customer base, improve competitive position, and bring on new technology platforms.

Revenues by Segment

U.S. Health and Human Services segment revenues of $300.4 million increased 4% year over year mainly driven by new work. U.S. Federal Services segment revenues of $312.2 million were up more than 100% from the year-ago quarter. Outside U.S. segment revenues of $142.4 million declined 6% year over year on a reported basis and 2% on a constant-currency basis.

Sales and Pipeline

Year to date signed contract awards at Sep 30, 2019 totaled $2.6 billion and contracts pending (awarded but unsigned) totaled $242 million. The sales pipeline at Sep 30, 2019, was roughly $30.2 billion. This included roughly $2.9 billion in proposals pending, $1.2 billion in proposals in preparation and $26.1 billion in opportunities tracking.

Operating Performance

Operation income of $77.6 million increased 25.3% year over year. Operating margin of 10.3% declined 80 basis points (bps).

Balance Sheet and Cash Flow

The company ended the quarter with cash and cash equivalents balance of $105.6 million compared with $71.1 million in the prior quarter. Long-term debt at the end of the quarter was $268 million. Free cash flow was $65.2 million. MAXIMUS paid out dividends of $16 million in the quarter.

Outlook

MAXIMUS expects fiscal 2020 earnings per share in the range of $3.95 to $4.15. The company guided revenues in the range of $3.15-$3.3 billion.

Cash flows from operations are expected to range between $300 million and $350 million, and free cash flow to range between $275 million and $325 million. Estimated effective income tax rate is between 24.5% and 25.5%.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -9.03% due to these changes.

VGM Scores

At this time, Maximus has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Maximus has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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