Why Is Maximus (MMS) Up 1% Since Last Earnings Report?
A month has gone by since the last earnings report for Maximus (MMS). Shares have added about 1% in that time frame, underperforming the S&P 500.
Will the recent positive 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 drivers.
Maximus Misses Q4 Earnings Estimates
Maximus, Inc.’s fourth-quarter fiscal 2023 earnings and revenues missed the Zacks Consensus Estimate.
Quarterly adjusted earnings (excluding 33 cents from non-recurring items) of $1.29 per share missed the Zacks Consensus Estimate by 3.7% and decreased 7.9% year over year. Revenues of $1.26 billion lagged the consensus mark by 1% but increased 7.1% year over year.
Segmental Revenues
The U.S. Services segment’s revenues of $473.8 million grew 11.8% year over year but missed our estimate of $483.6 million. The U.S. Federal Services segment’s revenues of $617.4 million increased 6.6% from the year-ago reported number and surpassed our estimate of $604.3 million. The Outside the U.S. segment’s revenues of $168.7 million decreased 3.2% year over year and lagged our estimate of $182.9 million.
Sales and Pipeline
Year-to-date signed contract awards, as of Sep 30, totaled $6.1 billion. Contracts pending (awarded but unsigned) amounted to $878 million. The sales pipeline, as of Sep 30, was $37.1 billion. This included $1.2 billion in pending proposals, $0.97 billion in proposals in preparation and $34.9 billion in opportunities tracking.
The book-to-bill ratio, as of Sep 30, 2023, was 1.2 on a trailing 12-month basis.
Operating Performance
Adjusted operating income of $125.98 million decreased 8% year over year. This compares with our expected adjusted operating income of $132.1 million, down 3.6% year over year. Adjusted operating income margin of 10% decreased 160 basis points year over year.
Balance Sheet and Cash Flow
Maximus ended the quarter with a cash and cash equivalents balance of $65.4 million compared with $35 million reported at the end of the prior quarter.
The company used $144.6 million in cash from operations. Capital expenditures were $31.8 million and free cash flow amounted to $112.8 million.
Fiscal 2024 Guidance
Total revenues are expected to be between $5.05 billion and $5.20 billion. Earnings (on an adjusted basis) are anticipated in the range of $5.05-$5.35 per share.
Adjusted operating income is expected to range between $488 million and $513 million. Free cash flow is expected to range between $290 million and $340 million for fiscal year 2024. The company forecasts interest expense of approximately $70 million, an effective income tax rate between 24.5% and 25.5%, and weighted average shares outstanding between 62.2 million and 62.3 million for fiscal year 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, Maximus has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Maximus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Maximus belongs to the Zacks Government Services industry. Another stock from the same industry, ICF International (ICFI), has gained 2.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
ICF reported revenues of $501.52 million in the last reported quarter, representing a year-over-year change of +7.2%. EPS of $1.81 for the same period compares with $1.61 a year ago.
ICF is expected to post earnings of $1.64 per share for the current quarter, representing a year-over-year change of +5.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for ICF. Also, the stock has a VGM Score of D.
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