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Maximus (MMS) Down 5.4% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Maximus (MMS). Shares have lost about 5.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Maximus 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.

MAXIMUS Misses Q3 Earnings, Revenues Beat

MAXIMUS reported mixed third-quarter fiscal 2022 results with earnings missing the Zacks Consensus Estimate but revenues beating the same.

Quarterly adjusted earnings of 78 cents per share missed the Zacks Consensus Estimate by 20.4% and decreased 53% year over year. The bottom line in the quarter was weighed down by a contract in the Outside the U.S. Segment that required a write-down of $11.7 million, or $0.14 EPS, decline in short-term COVID-19 response work and lower volumes in core programs.

Revenues of $1.1 billion beat the consensus mark by 3.4% but decreased 9.5% year over year. The decrease was due to decline in short-term COVID-19 response work partially offset by organic growth and contributions from the acquisitions in the U.S. Federal Services segment.

Segmental Revenues

The U.S. Services segment’s revenues of $399 million decreased 8.5% year over year. The U.S. Federal Services segment’s revenues of $526 million declined 14.9% from the year-ago quarter’s reported figure. Outside the U.S. segment revenues of $201 million increased 6% year over year.

Sales and Pipeline

Year-to-date signed contract awards on Jun 30, 2022, totaled $4 billion, and contracts pending (awarded but unsigned) amounted to $476 million. The sales pipeline at Jun 30, 2022, was $33.5 billion. This included $7.3 billion in pending proposals, $3.6 billion in proposals in preparation and $21.6 billion in opportunities tracking.

Operating Performance

Operating income of $54.6 million declined 4.8% year over year. Operating income margin of 4.8% was lower than the year-ago quarter’s figure of 11.2%.

Balance Sheet and Cash Flow

MAXIMUS ended the quarter with cash and cash equivalents of $93.7 million compared with $92.6 million in the prior quarter.

The company generated $57.9 million of cash from operations and capital expenditures were $13 million. Free cash flow amounted to $44.9 million.

Updated 2022 Outlook

MAXIMUS trimmed its 2022 adjusted EPS guidance to $3.95-$4.15 from the previous view of $4.07-$4.57. The updated guidance range is however above the current Zacks Consensus Estimate of $4.

MAXIMUS tweaked its revenue guidance for 2022. The company currently expects revenues in the range of $4.55-$4.65 billion compared with the previous guidance of $4.5-$4.7 billion.

Cash flows from operations are expected between $220 million and $260 million compared with the previous guidance of $275 million and $325 million. Free cash flow is anticipated in the range of $170-$210 million compared with the prior expectation of $225-$275 million. The effective tax rate is anticipated in the range of 25-25.5%. Weighted average shares outstanding are projected in the range of 61.8-62 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Maximus has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Maximus has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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