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Amdocs (DOX) Soars 5% on Q3 Earnings Beat, Upbeat FY22 Guidance

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Amdocs DOX shares gained 4.8% in Wednesday’s extended trading session following the company’s better-than-expected third-quarter fiscal 2022 earnings results. The upbeat revenue and earnings guidance for fiscal 2022 boosted investors’ confidence, resulting in an appreciation in the company’s stock price.

Amdocs reported third-quarter non-GAAP earnings of $1.27 per share, which was toward the higher end of its previously guided range of $1.23-$1.29. Quarterly earnings also beat the Zacks Consensus Estimate by a penny and our estimates by a couple of cents. However, the bottom line declined 5.9% year over year due to the higher effective tax rate.

Record revenues of $1.16 billion matched the consensus mark and came at the midpoint of management’s guided range of $1.14-$1.18 billion. Our estimates for third-quarter revenues were also pegged at $1.16 billion. Compared with the year-ago quarter, revenues were up 8.8% on a reported basis and 10.8% on a constant-currency basis.

Amdocs’ top line was primarily driven by North America’s high activity levels among top consumers. However, unfavorable foreign currency movements subdued the figure.

Amdocs Limited Price, Consensus and EPS Surprise

Amdocs Limited Price, Consensus and EPS Surprise
Amdocs Limited Price, Consensus and EPS Surprise

Amdocs Limited price-consensus-eps-surprise-chart | Amdocs Limited Quote

Quarterly Details

North America reported record revenues of $788 million (68% of total revenues), highlighting a 14.9% year-over-year surge.

Europe revenues (12.5% of total revenues) of $146.1 million decreased 6.2% year over year. Rest of the World revenues (19.5% of total revenues) grew marginally to $226.2 million from $224.5 million in the year-ago quarter.

Managed services revenues jumped 10.4% year over year to $717.9 million.

The company ended the fiscal third quarter of 2022 with a 12-month backlog of $3.95 billion, up $60 million sequentially and $360 million year over year.

Non-GAAP research & development expenses as a percentage of revenues increased 10 basis points (bps) on a year-over-year basis to 7.6%.

Non-GAAP SG&A expenses as a percentage of revenues increased 20 bps year over year to 11%.

The non-GAAP operating margin remained flat on a year-over-year basis at 17.6%.

Balance Sheet and Cash Flow

Amdocs had cash and short-term investments of $850.3 million as of Jun 30, 2022 compared with $856.4 million as of Mar 31, 2022.

In the third quarter, DOX generated operating cash flow of $167 million and free cash flow of $126 million. In the first nine months of fiscal 2022, it generated operating and free cash flows of $540 million and $394 million, respectively.

The company repurchased shares worth $100 million in the third quarter and $401 million in the first nine months of fiscal 2022. During the nine months, it paid out dividends of $138 million. Additionally, Amdocs’ board approved the new increased quarterly cash dividend rate of 39.5 cents per share. The dividends will be paid out on Oct 28, 2022 to shareholders of record as of Sep 30.

Guidance Update

For fiscal 2022, Amdocs now anticipates revenue growth of 6.2-7.2% on a reported basis compared with the previous forecast of 5.2-7.2%. On a constant-currency basis, revenues are projected to increase in the band of 9.6-10.6% year over year compared with the earlier projection of 8-10%.

The updated fiscal 2022 outlook reflects an expected unfavorable foreign currency impact of approximately 1.2% on a year-over-year basis compared with the previous forecast of 0.8%.

Non-GAAP earnings are estimated to grow between 9.6% and 10.9% compared with the prior projection of 7.3% and 10.3%.

For the fourth quarter of fiscal 2022, the company projects revenues between $1,145 million and $1,185 million and non-GAAP earnings in the range of $1.26-$1.32 per share. The outlook reflects an expected sequential unfavorable foreign currency impact of approximately $4 million.

Zacks Rank & Stocks to Consider

Currently, Amdocs carries a Zacks Rank #3 (Hold). Shares of DOX have rallied 14.6% year to date (“YTD”).

Some better-ranked stocks worth considering from the broader technology sector are 8x8, Inc. EGHT, Cadence Design Systems CDNS and Manhattan Associates MANH, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for 8x8's second-quarter fiscal 2023 earnings has been revised upward by a penny to four cents per share over the past seven days. For fiscal 2023, the Zacks Consensus Estimate for 8x8's earnings has moved north by 13 cents to 26 cents per share in the past seven days.

8x8's earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while matching the same in one, the average surprise being 175%. Shares of EGHT have plunged 66.5% YTD.

The Zacks Consensus Estimate for Cadence Design Systems' third-quarter 2022 earnings has been revised upward by nine cents to 97 cents per share over the past 30 days. For 2022, earnings estimates have moved north by 5.7% to $4.11 per share in the past 30 days.

Cadence Design Systems' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 9.8%. Shares of CDNS have decreased 2.3% YTD.

The Zacks Consensus Estimate for Manhattan Associates' third-quarter 2022 earnings has been revised upward by a penny to 57 cents per share in the past 30 days. For 2022, earnings estimates have moved south by 18 cents to $2.38 per share in the past 30 days.

Manhattan Associates' earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 30.3%. Shares of MANH have plunged 6.7% YTD.


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