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Amdocs Meets Zacks Estimates

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Amdocs Limited’s (DOX - Free Report) first quarter of fiscal 2013 adjusted earnings per share (excluding special items) stood at 65 cents, which was inline with the Zacks Consensus Estimate. The impressive outcome was primarily based on the stabilization of Amdocs’ business with its major client AT&T Inc. (T - Free Report) to some extent and the continuous double-digit growth in the emerging markets.

First Quarter Results in Details

Quarterly net income, on a GAAP basis, was $99 million or 61 cents per share compared with a net income of $92.7 million or 53 cents per share in the prior-year quarter. Quarterly total revenue came in at $826.4 million, up 2.4% year over year, and slightly above the Zacks Consensus Estimate of $825 million.  

Amdocs posted gross margin of 35.2% in the reported quarter against 35.9% in the year-ago quarter. Reported operating income was approximately $112.7 million, up 3.4% year over year. Again, operating margin was 13.6% against 13.5% in the prior-year quarter. At the end of the first quarter of fiscal 2013, total order backlog was $2,800 million compared with $2,690 million at the end of the year-earlier quarter. In the reported quarter, Amdocs repurchased shares worth $103.7 million.

During the reported quarter, Amdocs generated around $145.5 million in cash from operations compared with $149.9 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditure) at the end of the first quarter of fiscal 2013 stood at $115.6 million compared with $121.6 million at the end of fiscal 2011.

At the end of the first quarter of fiscal 2013, Amdocs had approximately $961.3 million in cash and marketable securities and no outstanding debt on its balance sheet compared with $1,118.2 million of cash and marketable securities and nil outstanding debt at the end of fiscal 2011.

Segment Wise Results

Service revenue was $807.4 million, up 4.7% year over year. License revenue was approximately $18.9 million, down 47.2% year over year. Technologically, Customer Experience Systems revenue was $783.8 million, up 3.4% year over year while Directory revenue was $42.6 million, down 13.1% year over year. The company’s core Managed Services revenue came in at $429.8 million, up 2.4% year over year.

Geographically, North America generated $593.6 million, up 3.5% year over year; Europe generated $99.2 million, down 10.1% year over year; while the rest of the world contributed the remaining $133.6 million, up 8.7% year over year. Revenue from the emerging markets came in at $98.2 million, showing an annualized growth of 19%.

Financial Outlook

Management expects the revenue of the second quarter of fiscal 2013 to be in the range of $820–$850 million. Earnings per share, on a GAAP basis, are expected to be between 69 cents and 75 cents. Moreover, non-GAAP earnings per share, including 5–6 cents per share of equity-based compensation expense, are projected in the range of 58–66 cents.  

Amdocs also decided to make a quarterly cash dividend payment on April 19, 2013 to its shareholders of record as on March 28, 2013.

Our Take

Amdocs is well positioned in the market as carriers sell bundled and converged IP-based network solutions to subscribers. There are huge opportunities that exist with Amdocs as more telecom companies have started deploying 3G and 4G networks. Moreover, the renewal of long-term contracts with Sprint-Nextel Corp. (S - Free Report) and new order wins from America Movil (AMX - Free Report) will further bolster its top-line growth going forward.

Currently, Amdocs has a Zacks Rank #2 (Buy).

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