Amdocs (DOX) Down 0.7% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Amdocs (DOX). Shares have lost about 0.7% 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 its most recent earnings report in order to get a better handle on the important drivers.

Amdocs Reports Q1 Results

Amdocs reported first-quarter fiscal 2019 results, wherein the bottom line missed the Zacks Consensus Estimate but the top line beat the same.

Quarterly non-GAAP earnings came in at 98 cents per share, down from $1.06 in the year-ago quarter. The bottom line also missed the Zacks Consensus Estimate of 99 cents. However, the figure came within the company’s guided range of 95 cents to $1.01.

Revenues for the reported quarter came in at $1.012 billion, beating the consensus estimate of $1.007 billion, and marking a year-over-year improvement of 3.5%. The top line also came within the company’s guided the range of $990-$1,030 million.

Continued flow of new customers, penetration into new regions and a number of awards for projects and managed services drove revenue growth. However, a sequential impact of nearly $4 million in foreign currency movements was a dampener.

Quarter Details

Geographically, revenues from North America (65.3% of total) were $660.5 million, up 2.7% from the year-ago quarter driven by digital modernization requirements of many of Amdocs’ communications, Pay TV and media customers. Europe (14.4%) recorded revenues of $146.1 million, up 9.3%. Rest of the World (20.3%) generated revenues of $205.5 million, up 2.2%.

The company made progress with Globe Telecom in the Philippines, which has selected Network Functions Virtualization solution to automate the operations and management of its Networks-as-a-Service offering for enterprise customers.

Recently, Amdocs bagged a digital modernization project and managed services agreement with PJSC VimpelCom in Russia, and a managed transformation deal with a key service provider in Spain. This further boosts its foothold in Europe.

During the quarter, the company expanded its customer footprint in North American Pay TV market. A multi-year deal was also signed between Amdocs and Altice USA to expand the latter’s digital and mobile offerings.

Notably, a five-year digital transformation and cloud migration deal with a leading Southeast Asian content and consumer provider was one of the highlights of Amdocs’ achievements in the Rest of the World.

Management is optimistic about the 12-month backlog that reached $3.37 billion at the end of the quarter, increasing $10 million year over year. The company continued to aid digital, media and network transformations of its clients, which improved its revenue growth rate.

Margins and Operating Metrics

The company incurred non-GAAP operating expenses of $837.2 million, up 3.5% from the year-ago quarter.

Non-GAAP operating income increased 3.4% to $174.8 million.

Operating margin of 17.2% for the quarter remained flat year over year.

Balance Sheet & Cash Flow

As of Dec 31, 2018, Amdocs had cash, cash equivalents and short-term interest-bearing investments of $458.7 million compared with $519.2 million recorded in the prior quarter.

During the reported quarter, the company repurchased shares worth $99 million. Also, its board of directors recently approved the payment of a quarterly dividend of $0.285 per share. The dividend will be paid on Apr 19, 2019.

Outlook

For second-quarter fiscal 2019, Amdocs expects revenues in the range of $995-$1,035 million, and adjusted earnings per share in the band of $1 to $1.06.

For fiscal 2019, the company lowered its revenue guidance on a reported basis. It now expects revenues to grow 0.5-4.5% year over year compared with 1-5% rise expected earlier.

However, Amdocs reiterated its revenue guidance on a constant currency basis. It expects revenue growth between 2% and 6%. This guidance takes into account 1.5% year-over-year negative impact of foreign exchange fluctuations.

The company continues to expect non-GAAP earnings per share growth of 3-7% year over year for the full fiscal year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Amdocs has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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