Why Is Amdocs (DOX) Down 2.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Amdocs (DOX). Shares have lost about 2.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Amdocs due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Amdocs Q2 Earnings & Revenues Top Estimates, View Cut

Amdocs Limited reported second-quarter fiscal 2020 results, wherein both top and bottom lines beat estimates.

Quarterly non-GAAP earnings per share came in at $1.08, up from $1.02 in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate by 1.89%. The figure came within the company’s guided range of $1.03-$1.09.

Revenues for the quarter came in at $1.05 billion, improving 2.9% year over year. The top line also came within the company’s guided range of $1.035-$1.075 billion and beat the consensus mark of $1.04 billion.

Sequential growth in demand from North America and solid growth in the Rest of the World and Europe drove the results. Moreover, continued addition of new customers and strong project execution boosted revenues.

However, a negative sequential impact of nearly $8 million from foreign currency movements was a headwind.

The company also reduced its fiscal 2020 guidance due to the uncertainties related to the coronavirus pandemic.

Quarter Details

Region-wise, revenues from North America (63.5% of total revenues) were $662.1 million, up 0.2% from the year-ago quarter.

Europe (14.8%) recorded revenues of $154.7 million, up 5.9%. Rest of the World (21.6%) generated revenues of $225.2 million, up 9.6%.

Managed services revenues of $579.7 million grew 10.3%.

The twelve-month backlog, which includes anticipated revenues related to contracts, estimated revenues from managed service contracts, letters of intent, maintenance and estimated on-going support activities, came in at $3.46 billion during the quarter, down $60 million from the prior quarter.

The company incurred non-GAAP operating expenses of $867.4 million, up 3% from the year-ago quarter.

Non-GAAP operating income increased 1.8% to $181 million.

Balance Sheet & Cash Flow

Cash and cash equivalents as of Mar 31, 2020, were $763 million, up from $485.9 million in the previous quarter.

Cash flow from operating activities was $103 million, down from $163.9 million recorded in the previous quarter. Free cash flow was $57 million.

During the fiscal second quarter, the company repurchased shares worth $120 million. Also, its board of directors recently approved the payment of a quarterly dividend of $0.3275 per share. The dividend will be paid out on Jul 24.

Outlook

For third-quarter fiscal 2020, Amdocs expects revenues between $990 million and $1.04 billion, assuming approximately an $8-million sequential negative impact from foreign currency fluctuations.

Non-GAAP earnings per share of $1.00-$1.08 are expected for the fiscal third quarter.

For fiscal 2020, the company now expects revenues to be down 0.5% to up 2.5% year over year compared to its earlier projection of growth between 2.5% and 5.5%, with TTS contributing a little more than 1%.

Amdocs expects non-GAAP earnings to be flat to up 4% year over year compared with its previous expectation of 3-7% growth year over year.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -8.98% due to these changes.

VGM Scores

At this time, Amdocs has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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

Amdocs has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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