A month has gone by since the last earnings report for Maximus (MMS). Shares were flat in that time frame, underperforming the S&P 500.
Will the recent trend continue leading up to its next earnings release, or is Maximus due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
MAXIMUS Surpasses Q4 Earnings & Revenue Estimates
MAXIMUS reported better-than-expected fourth-quarter fiscal 2020 results.
EPS for the fourth quarter amounted to $1.02, which surpassed the Zacks Consensus Estimate by 12.1% and rose 9.7% year over year. Revenues of $923.8 million beat the consensus mark by 6.6% and increased 22.4% year over year. The uptick was driven by the Census contract in the U.S. Federal Services Segment and new COVID-19 response work to assist governments in supporting individuals and families during the coronavirus pandemic.
U.S. Services segment (previously named as U.S. Health & Human Services Segment) revenues of $371.3 million increased 23.6% (all organic) year over year, mainly due to new work. This includes work tied to COVID-19 response efforts and the expansion of existing contracts.
U.S. Federal Services segment revenues of $423.2 million surged 35.6% 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 $129.3 million declined 9.2% year over year on a reported basis. This segment has experienced the highest impact of pandemic.
Sales and Pipeline
Year-to-date signed contract awards at Sep 30, 2020 totaled $2.7 billion and contracts pending (awarded but unsigned) amounted to $744 million. The sales pipeline at Sep 30, 2020, was $33 billion. This included $2 billion in proposals pending, $1.5 billion in proposals in preparation and $29.6 billion in opportunities tracking.
Operating income of $84.5 million increased 8.9% year over year. Operating margin of 9.1% increased 690 basis points (bps) year over year. The operating margin fell due to lower revenues from performance-based contracts and a greater mix of lower margin, cost-plus work related to the Census contract.
Balance Sheet and Cash Flow
The company ended the quarter with cash and cash equivalents balance of $71.7 million compared with $81.5 million in the prior quarter. The company generated $148.5 million of cash from operations. Free cash flow is $136.2 million. MAXIMUS paid out dividends of $17.2 million.
MAXIMUS expects revenues in the range of $3.20-$3.40 billion. It expects earnings per share (EPS) in the range of $3.45-$3.70. Cash flows from operations are expected between $340 million and $390 million, and free cash flow between $300 million and $350 million. For fiscal 2021, estimated effective income tax rate is between 25.75% and 26.50%. Weighted average shares outstanding are anticipated in the range of 62.1-62.2 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 17.08% due to these changes.
At this time, Maximus has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Maximus has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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