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MAXIMUS (MMS) Misses on Q2 Earnings Amid Coronavirus Crisis

Zacks Equity Research

MAXIMUS, Inc. MMS reported mixed second-quarter fiscal 2020 results with earnings missing the Zacks Consensus Estimate and revenues beating the same.

Earnings per share (EPS) amounted to 43 cents, which missed the Zacks Consensus Estimate by 43.4% and plunged 59.8% year over year. The downside was primarily caused by the impact of COVID-19 pandemic and timing of the changed order.

Revenues of $818.1 million beat the consensus mark by 9.6% and increased 11.1% year over year. The year-over-year uptick was driven by the Census contract in the United States and organic revenue growth in the company’s U.S. Health & Human Services and U.S. Federal Services Segments.

Shares of MAXIMUS have lost 3.6% in the past year against 10.5% growth of the industry it belongs to.

Revenues by Segment

U.S. Health and Human Services segment revenues of $308.7 million increased 6.2% (all organic) year over year, mainly on new contracts and expansion of existing work. U.S. Federal Services segment revenues of $393.4 million rallied 35.8% from the year-ago quarter’s reported figure. In this segment, organic revenue growth was 6.7%. Outside the U.S. segment revenues of $116 million declined 26% year over year on a reported basis and 24% on a constant-currency basis. Operating margin i this segment was 2.9%.

Sales and Pipeline

Year to date signed contract awards at Mar 31, 2020 totaled $729.8 million and contracts pending (awarded but unsigned) totaled $215.8 million. The sales pipeline at Mar 31, 2020 was $29.2 billion. This included $2.8 billion in proposals pending, $2 billion in proposals in preparation and $24.4 billion in opportunities tracking.

Maximus Inc Price, Consensus and EPS Surprise

Maximus Inc Price, Consensus and EPS Surprise

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

Operating Performance

Operating income of $37.3 million decreased 54.4% year over year. Operating margin of 4.6% declined 650 basis points (bps). Timing related change order and impact of the pandemic on performance-based work, ongoing investments in business development and technological capabilities have negatively impacted operating performance in the quarter.

Balance Sheet and Cash Flow

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents balance of $126.3 million compared with $149.5 million in the prior quarter. The company generated $22 million of cash from operations. Free cash flow amounted to $13.4 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MAXIMUS paid out dividends of $17.9 million and repurchased approximately 2.74 million shares for $165.1 million.

Trimmed Outlook

The company lowered its fiscal 2020 guidance. Earnings per share are now expected in the range of $2.95-$3.15 compared with the previously expectation of $3.95 to $4.15. The midpoint ($3.05) of the revised guided range is lower than the current Zacks Consensus Estimate of $3.67.

The company expects revenues of $3.15-$3.25 billion compared with the previous expectation of $3.15-$3.3 billion. The midpoint ($3.20) of the current range is again lower than the Zacks Consensus Estimate of $3.06.

Cash flows from operations are expected between $250 million and $300 million compared with the previous expectation of $300 million and $350 million.

Free cash flow is anticipated between $200 million and $250 million compared with the previous projection of $275 million and $325 million.

Sectorial Snapshot

S&P Global Inc. SPGI reported first-quarter 2020 adjusted EPS of $2.73, which beat the consensus mark by 15.7% and improved 29.4% year over year on revenue growth, benefits of productivity initiatives and reduced business travel.

IQVIA Holdings Inc. IQV delivered first-quarter 2020 adjusted EPS of $1.50, which outpaced the consensus mark by 1.4% but fell 1.9% on a year-over-year basis. The reported figure was within the guidance of $1.46-$1.51.

Insperity, Inc. NSP came up with first-quarter 2020 adjusted earnings of $1.70 per share, which surpassed the consensus mark by 5.6% but declined 14.1% year over year. The reported figure was in line with the higher-end of the guidance of $1.61-$1.70.

All the stocks carry a Zacks Rank #3.

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