Amdocs (DOX) Up 0.3% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Amdocs (DOX). Shares have added about 0.3% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Amdocs Q3 Earnings and Revenues Surpass Estimates
Amdocs reported better-than-expected results for the third quarter of fiscal 2023.
The company reported third-quarter non-GAAP earnings of $1.57 per share, which surpassed the Zacks Consensus Estimate of $1.47 and came above management’s guidance of $1.45-$1.51. The non-GAAP earnings gained 23.6% from the year-ago quarter’s earnings of $1.27 per share.
Amdocs reported record revenues of $1.24 billion, which surpassed the consensus mark of $1.23 billion and were within management’s guidance range of $1.215-$1.255 billion. Compared with the year-ago quarter, revenues were up 6.5% on a reported basis and 6.9% on a constant-currency basis.
Quarterly Details
Amdocs’ top-line performance was primarily driven by continued strength in North America and healthy activity levels among top consumers in Europe. However, foreign currency movements subdued the figure.
North America reported record revenues of $831 million (67.2% of the total revenues), highlighting a 5.4% year-over-year increase. Europe revenues (15.2% of the total revenues) of $187 million increased 28.2% year over year. Rest of the World revenues (17.6% of the total revenues) fell 3.7% year over year to $217.8 million. Our model estimates for North America, Europe and Rest of the World were pegged at $837.8 million, $164.3 million and $228.5 million, suggesting growth of 6.3%, 12.5% and 1%, respectively.
Managed services revenues grew 0.3% year over year to $720 million. The company ended the third quarter of fiscal 2023 with a 12-month backlog of $4.14 billion, up $30 million sequentially and $190 million year over year. Our model estimates for managed services revenues and backlog were pegged at $741 million and $4.19 billion, respectively.
The non-GAAP operating income increased 7.8% year over year to $220 million, while the operating margin expanded 20 basis points to 17.8%. The year-over-year improvement in the non-GAAP operating margin was mainly driven by the company’s consistent project execution and ongoing efficiency gains.
Balance Sheet and Cash Flow
Amdocs had cash and short-term investments of $749.5 million as of Jun 30, 2023 compared with $861.6 million as of Mar 31, 2023.
In the third quarter of fiscal 2023, net cash provided by operating activities was $172.6 million, down from $294.4 million in the previous quarter and up from $166.8 million in the year-ago period. Free cash flow was $144 million compared with the previous quarter’s $259.4 million and the year-earlier quarter’s $125.9 million.
During the first nine months of fiscal 2023, net cash provided by operating activities was $550.3 million and free cash flow was $452.5 million.
In the fiscal third quarter, the company repurchased shares worth $129 million and paid out $52 million in dividends. Amdocs’ board approved the new increased quarterly cash dividend rate of 43.5 cents per share. The dividend will be paid out on Oct 27, 2023, to shareholders of record as of Sep 29.
FY23 Guidance Update
For fiscal 2023, the company now anticipates revenue growth of 6.3-7.1% on a reported basis, which tightened from the previous guidance range of 6-8%. On a constant-currency basis, revenues are projected to increase in the band of 7.2-8% year over year compared with previously estimated 7-9% band.
The updated fiscal 2023 outlook reflects an expected unfavorable foreign currency impact of approximately 0.9% on a year-over-year basis compared with the previous forecast of roughly 1%. Adjusted earnings are now estimated to grow in the 11-12% band, which tightened from the previous range of 9-13%.
For the fourth quarter of fiscal 2023, the company projects revenues between $1.220 billion and $1.260 billion and adjusted earnings in the range of $1.38-$1.44 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -6.57% due to these changes.
VGM Scores
Currently, Amdocs has an average Growth Score of C, though it is lagging a bit 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 top 40% 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Amdocs has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Amdocs belongs to the Zacks Computers - IT Services industry. Another stock from the same industry, Roper Technologies (ROP), has gained 1.7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Roper Technologies reported revenues of $1.53 billion in the last reported quarter, representing a year-over-year change of +16.8%. EPS of $4.12 for the same period compares with $3.95 a year ago.
For the current quarter, Roper Technologies is expected to post earnings of $4.21 per share, indicating a change of +14.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Roper Technologies. Also, the stock has a VGM Score of F.
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