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MAXIMUS (MMS) Beats on Q1 Earnings, Raises 2021 Guidance

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Zacks Equity Research
·5 min read
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MAXIMUS, Inc. MMS reported better-than-expected first-quarter fiscal 2021 results.

Earnings per share (EPS) in the first quarter amounted to $1.03, which surpassed the Zacks Consensus Estimate by 9.6% and rose 13.2% year over year. The bottom line was primarily driven by surge in operating income.

Revenues of $945.6 million beat the consensus mark by 8.9% and increased 15.6% year over year. The uptick was driven by higher revenues in all the segments (U.S. Services segment, U.S. Federal Services Segment and Outside the U.S. segment).

Shares of MAXIMUS have gained 9% in the past year against 2.7% growth of the industry it belongs to.

Segmental Revenues

U.S. Services segment revenues of $384.9 million increased 23.3% (all organic) year over year, mainly owing to new work. The uptick was primarily driven by an estimated $114 million of COVID-response work.

U.S. Federal Services segment revenues of $405.2 million surged 10.5% from the year-ago quarter’s reported figure. This segment realized growth from new contracts and new work related to the COVID-19 response efforts.

Outside the U.S. segment revenues of $155.4 million increased 11.5% year over year on a reported basis. This segment has realized growth driven by job placement activities in Australia on the back of seasonal spike in demand for qualified job seekers during the holiday season.

Maximus, Inc. Price, Consensus and EPS Surprise

Maximus, Inc. Price, Consensus and EPS Surprise
Maximus, Inc. Price, Consensus and EPS Surprise

Maximus, Inc. price-consensus-eps-surprise-chart | Maximus, Inc. Quote

Sales and Pipeline

Year-to-date signed contract awards at Dec 31, 2020 totaled $594 million and contracts pending (awarded but unsigned) amounted to $1.1 billion. The sales pipeline at Dec 31, 2020, was $31.6 billion. This included $3.6 billion in proposals pending, $1.4 billion in proposals in preparation and $26.7 billion in opportunities tracking.

Operating Performance

Operating income of $87.6 million increased 10.7% year over year. Operating income margin of 9.3% declined 40 basis points (bps) year over year. The operating income margin fell due to temporary program changes and lower revenue and profit from performance-based contracts due to the global pandemic.

Balance Sheet and Cash Flow

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $132.6 million compared with $71.7 million in the prior quarter. The company generated $98.1 million of cash from operations. Free cash flow is $89 million. MAXIMUS paid out dividends of $17.2 million.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Raised 2021 Outlook

Outlook for fiscal 2021 improved primarily due to recent awards, increased scope and contract extensions.

MAXIMUS expects EPS in the range of $3.55-$3.75 (previous outlook: $3.45-$3.70), the midpoint ($3.65) of which is higher than the Zacks Consensus Estimate of $3.63.

It expects revenues in the range of $3.40-$3.52 billion (previous outlook: $3.20-$3.40 billion). The midpoint ($3.46 billion) is higher than the Zacks Consensus Estimate of $3.3 billion.

Cash flows from operations are expected between $350 million and $400 million (previous guidance: $340 million and $390 million). Free cash flow is anticipated in the range of $310-$360 million (previous guidance: $300 million and $350 million).

Expectations for fiscal 2021 effective tax rate and weighted average shares are kept unchanged from previous reported figure.

Performance of Other Business Services Companies

Rollins’ ROL fourth-quarter 2020 adjusted earnings of 13 cents per share came ahead of the consensus estimate and rose from the year-ago quarter’s tally by 18.2%. Revenues of $536.3 million beat the consensus mark by 1.7% and increased 6% year over year.

IHS Markit’s INFO fourth-quarter fiscal 2020 adjusted earnings per share of 72 cents beat the Zacks Consensus Esimate by 7.5% and increased 11% on a year-over-year basis. Total revenues came in at $1.11 billion, marginally missing the consensus mark and declining 1% from the year-ago quarter’s levels on a reported basis.

Automatic Data Processing’s ADP second-quarter fiscal 2021 adjusted earnings per share of $1.52 beat the consensus mark by 17.8% and were flat year over year. Total revenues of $3.69 billion beat the consensus mark by 3.2% and increased 0.7% year over year.

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