MAXIMUS, Inc. MMS reported dismal fourth-quarter fiscal 2019 results, with earnings and revenues missing the Zacks Consensus Estimate.
Earnings per share of 93 cents missed the consensus estimate by 1.1% but increased 27.4% year over year. Revenues of $755 million missed the consensus mark by 0.8% but improved 35.2% year over year. The year-over-year uptick in results was mainly driven by the buyout of citizen engagement centers.
Management stated that the buyout allowed the company to build scale, expand customer base, improve competitive position, and bring on new technology platforms.
The stock gained 16.9% year to date, significantly underperforming the 45.8% rally of the industry it belongs to.
Revenues by Segment
U.S. Health and Human Services segment revenues of $300.4 million increased 4% year over year mainly, driven by new work. U.S. Federal Services segment revenues of $312.2 million were up more than 100% from the year-ago quarter. Outside U.S. segment revenues of $142.4 million declined 6% year over year on a reported basis and 2% on a constant-currency basis.
Maximus, Inc. Revenue (TTM)
Maximus, Inc. revenue-ttm | Maximus, Inc. Quote
Sales and Pipeline
Year to date signed contract awards at Sep 30, 2019 totaled $2.6 billion and contracts pending (awarded but unsigned) totaled $242 million. The sales pipeline at Sep 30, 2019, was $30.2 billion. This included $2.9 billion in proposals pending, $1.2 billion in proposals in preparation and $26.1 billion in opportunities tracking.
Operation income of $77.6 million increased 25.3% year over year. Operating margin of 10.3% declined 80 basis points (bps).
Balance Sheet and Cash Flow
The company ended the quarter with cash and cash equivalents balance of $105.6 million compared with $71.1 million in the prior quarter. Long-term debt at the end of the quarter was $268 million. Free cash flow was $65.2 million. MAXIMUS paid out dividends of $16 million in the quarter.
The company expects fiscal 2020 earnings per share of $3.95 to $4.15, the midpoint ($4.05) of which is lower than the Zacks Consensus Estimate of $4.09. The company expects revenues of $3.15-$3.3 billion.
Cash flows from operations are expected to be between $300 million and $350 million, and free cash flow to be between $275 million and $325 million. Estimated effective income tax rate is between 24.5% and 25.5%.
Zacks Rank & Stocks to Consider
Maximus currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are Global Payments GPN, Mastercard MA and Cardtronics CATM. While Global Payments sports a Zacks Rank #1 (Strong Buy), Mastercard and Cardtronics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS (three to five years) growth rates for Global Payments, Mastercard and Cardtronics are 17%, 15.9% and 4%, respectively.
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