Amdocs (DOX) Down 10.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Amdocs (DOX). Shares have lost about 10.7% 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 Earnings & Revenues Surpass Estimates in Q1

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

Quarterly non-GAAP earnings per share came in at $1.06, up from 98 cents in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate by 1%. The figure came within the company’s guided range of $1.02-$1.08.

Revenues for the quarter came in at $1.04 billion, improving 3% year over year. The top line also came within the company’s guided range of $1.015-$1.055 billion and beat the consensus mark by 1%.

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. Also, a positive impact of nearly $3 million sequentially from foreign currency movements was a tailwind.

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. Notably, Amdocs signed a multi-year deal with television studio MGM. However, the delayed merger of T-Mobile and Sprint was a dampener.

Performance in North America was driven by stable activity trends at AT&T (NYSE:T) and healthy activity levels of many customers in the border region.

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%.

Twelve-month backlog, which includes anticipated revenues related to contracts, estimated revenues from managed services contracts, letters of intent, maintenance and estimated on-going support activities, came in at $3.52 billion during the quarter, up $30 million from the prior quarter.

Operating Metrics

The company incurred non-GAAP operating expenses of $864 million, up 3.2% from the year-ago quarter.

Non-GAAP operating income increased 1.8% to $177.9 million.

Balance Sheet & Cash Flow

Cash and cash equivalents as of Dec 31, 2019, were $485.9 million, up from $471.6 million in the previous quarter.

Cash flow from operating activities was $163.9 million.

During the fiscal first quarter, the company repurchased shares worth $90 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 Apr 24, 2020.

Outlook

For second-quarter fiscal 2020, Amdocs expects revenues of $1.035-$1.075 billion, assuming approximately a $2-million sequential positive impact from foreign currency fluctuations.

Non-GAAP earnings per share of $1.03-$1.09 are expected for the fiscal second quarter.

For fiscal 2020, the company expects revenues to grow 2.5-5.5% year over year, with TTS contributing a little more than 1%.

Amdocs expects non-GAAP earnings per share growth of 3-7% year over year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -5.4% due to these changes.

VGM Scores

Currently, Amdocs has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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. It's no surprise Amdocs has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.