Last week saw the newest second-quarter earnings release from Amdocs Limited (NASDAQ:DOX), an important milestone in the company's journey to build a stronger business. It looks like a credible result overall - although revenues of US$1.0b were in line with what the analysts predicted, Amdocs surprised by delivering a statutory profit of US$0.94 per share, a notable 11% above expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following last week's earnings report, Amdocs' five analysts are forecasting 2020 revenues to be US$4.13b, approximately in line with the last 12 months. Statutory per share are forecast to be US$3.61, approximately in line with the last 12 months. Before this earnings report, the analysts had been forecasting revenues of US$4.21b and earnings per share (EPS) of US$3.54 in 2020. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of US$74.25, showing that the business is executing well and in line with expectations. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Amdocs analyst has a price target of US$83.00 per share, while the most pessimistic values it at US$66.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.4%, a significant reduction from annual growth of 2.9% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 11% next year. It's pretty clear that Amdocs' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Amdocs analysts - going out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Amdocs that you should be aware of.
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