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Amdocs (DOX) Q3 Earnings & Revenues Meet Estimates, Up Y/Y

Zacks Equity Research
Updated

Amdocs Limited DOX reported third-quarter fiscal 2018 results, where both the top-line bottom-line matched the Zacks Consensus Estimate.

Quarterly non-GAAP earnings came in at $1.03 per share compared with $1.02 in the year-ago quarter.

Revenues in the reported quarter came in at $1.002 billion, 3.7% higher than the year-ago figure. This is the first time that the company’s quarterly revenues exceeded the $1 billion mark.

Amdocs Limited Price, Consensus and EPS Surprise

 

Amdocs Limited Price, Consensus and EPS Surprise | Amdocs Limited Quote

Quarter Details

Customer Experience Solutions revenues were up 3.8% and reached $991 million in the reported quarter. Customer Experience Directory revenues were down nearly 6% year over year to $11.2 million.

Geographically, revenues from North America (64% of total) were $644.8 million, up 1.2% from the year-ago quarter. Europe (14%) recorded revenues of $139.3 million, up 11.3%.

Rest of the World (22%) generated revenues of $218.1 million, up 7.1%, driven by growth in Asia and other surrounding regions

Recently achieved customer awards and the company’s focus on project delivery and execution translated into healthy year-over-year growth in Europe and the Rest of the World, and improved revenues from North America.

Management is optimistic about the double-digit growth in the contribution of European revenues and the 12-month backlog that reached $3.33 billion at the end of the quarter.

Increasing investments in network function virtualization (NFV) and Pay TV and further digital modernization are tailwinds for Amdocs.

Management is extremely bullish about the company’s recent partnership with Comcast Business to help drive software defined wide area networks (SD-WAN) service.

The acquisitions of Vubiquity and UXP Systems have helped it enrich its offerings and cater to a larger market. Notably, the company won the Vubiquity managed services contract with Verizon.

Margins and Operating Metrics

The company reported non-GAAP operating expenses of $828.6 million, up 3.6% from the year-ago quarter. Non-GAAP operating income increased 3.8% and came in at $173.6 million. Operating margin of 17.3% remained flat year over year.

Balance Sheet & Cash Flow

As of Jun 30, 2018, Amdocs had cash, cash equivalents and short-term interest-bearing investmentsof $561 million compared with $666.8 million recorded in the prior quarter.

In the first nine months of fiscal 2018, the company generated net cash of $441.9 million from its operating activities compared with $437.1 million in the year-ago period.

During the reported quarter, the company repurchased shares worth $90 million. Also, its board of directors approved the payment of a quarterly dividend of 25 cents per share. The dividend will be paid on Oct 19 to shareholders on record as of Sep 28.

Outlook

Amdocs expects revenues in the range of $980-$1,020 million and adjusted earnings per share in the range of $0.95-$1.01 in fourth-quarter fiscal 2018.

The company reduced its revenue growth view for fiscal 2018. It now expects revenues to grow 2.2-3.2% year over year, down from the previous expectation of 2.3-4.3% growth. This guidance  takes into account the impact of foreign exchange fluctuations.  Moreover, management anticipates revenue from AT&T to decline in a double-digit rate in fiscal 2018. Directory is also expected to remain a drag in the full year.

Fiscal 2018 earnings growth expectations were also revised at 5-7% compared with the previously projected range of 4-8%.

Zacks Rank and Stocks to Consider

Amdocs currently has a Zacks Rank #3 (Hold).

Some top-ranked stocks in the broader technology sector are Adobe ADBE, Momo Inc. MOMO, and SCIENCE APPLICATIONS INTERNATIONAL CORPORATION SAIC, each sporting a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Adobe, Momo and SCIENCE APPLICATIONS INTERNATIONAL is projected to be 16.20%, 22% and 5%, respectively.

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