We reiterate our long-term Neutral recommendation on Amdocs Ltd. (DOX). The company reported mixed financial results for the fourth quarter of fiscal 2013. While earnings per share were exactly in line with the Zacks Consensus Estimate, revenues slightly fell below.
Why the Reiteration?
Amdocs is well positioned in the market as carriers sell bundled and converged IP-based network solutions to their subscribers. These services include video, wireless, fixed-mobile converged and high-speed broadband Internet access solutions. Amdocs offers integrated customer management systems, which are essential for carriers to prevent customer churn. Huge opportunities exist for Amdocs as more telecom companies started deploying 3G/4G networks.
The company has the largest customer base and the broadest product line in the industry, including a full suite of end-to-end solutions for both Business Support Systems (:BSS) and Operations Support Systems (:OSS). Business in North America was comparatively strong. Alongside, the emerging Asia Pacific markets are witnessing nearly double-digit revenue growth.
Nevertheless, Amdocs is exposed to the global economic downturn, particularly those events that affect the telecommunications industry. The macroeconomic scenario is yet to recover completely. In addition, delay in business transformation on the part of the carriers may reduce capital spending. Economic and political uncertainty in Europe may jeopardize the company’s financials, going forward. Furthermore, as the company is operating globally, it is also exposed to foreign currency exchange rate risk.
Other Stocks to Consider
Amdocs currently carries a Zacks Rank #2 (Buy). Other stocks in the same industry which are also doing well include CoStar Group Inc. (CSGP), EPAM Systems Inc. (EPAM) and Infosys Ltd. (INFY). All three stocks currently have a Zacks Rank #2 (Buy).