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MAXIMUS (MMS) Q2 Earnings Top, Stock Down 8.8% on Tepid EPS View

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MAXIMUS, Inc. MMS reported better-than-expected second-quarter fiscal 2022 results.

The stock has declined 8.8% since the earnings release despite impressive results as MMS’s earnings guidance for 2022 was weak. Adjusted earnings per share are currently anticipated in the range of $3.00-$3.50 (previous view: $4.00-$4.30). The midpoint ($3.25) of the projection is below the Zacks Consensus Estimate of $5.23 per share. Trimmed EPS guidance can be attributed to three reasons: Public health emergency is extended through mid-July, delays on ramping of new work in the U.S. Services and Outside the U.S. segments and revised expectations for the Australia employment services.

Quarterly adjusted earnings (excluding 27 cents from non-recurring items) of $1.07 per share surpassed the Zacks Consensus Estimate by 9.2% but decreased 17.1% year over year.

Revenues of $1.17 billion beat the consensus mark 8.6% and increased 22.7% year over year. The uptick was driven by contributions from the acquisitions in the U.S. Federal Services segment and start-ups ramping in the Outside the U.S. segment.

Maximus, Inc. Price, Consensus and EPS Surprise

Maximus, Inc. Price, Consensus and EPS Surprise
Maximus, Inc. Price, Consensus and EPS Surprise

Maximus, Inc. price-consensus-eps-surprise-chart | Maximus, Inc. Quote

Segmental Revenues

The U.S. Services segment’s revenues of $398.1 million decreased 11.2% year over year, mainly due to the expected reduction in short-term COVID-19 response work. The U.S. Federal Services segment’s revenues of $573.3 million rose 73.7% from the year-ago quarter’s reported figure. The uptick was driven by the Attain Federal, VES and Aidvantage acquisitions. Outside the U.S. segment, revenues of $206 million increased 13.8% year over year, driven by ramping of startups, mainly the U.K. Restart Program.

Sales and Pipeline

Year-to-date signed contract awards on Mar 31, 2022, totaled $1.47 billion while contracts pending (awarded but unsigned) amounted to $1.75 billion. The sales pipeline on Mar 31, 2022, was $29.8 billion. This included $7.4 billion of pending proposals, $3.6 billion worth of proposals in preparation and $18.8 billion as opportunities tracking.

Operating Performance

Operating income of $75.3 million declined 33.5% year over year. Operating income margin of 6.4% was lower than the year-ago quarter’s figure of 11.8%.

Balance Sheet and Cash Flow

MAXIMUS ended the quarter with cash and cash equivalents of $92.6 million compared with $135.1 million in the prior quarter.

MMS used $114.8 million of cash in operations while capital expenditures were $16.6 million. Free cash flow amounted to $98.2 million. MAXIMUS paid out dividends worth $17.3 million.

2022 Outlook

MMS is maintaining revenue guidance for fiscal 2022. MAXIMUS continues to expect revenues in the range of $4.5-$4.7 billion. The midpoint ($4.6 billion) of the guided range is above the Zacks Consensus Estimate of $4.5 billion.

Cash flows from operations are expected between $225 million and $300 million (prior view: $275 million and $325 million). Free cash flow is anticipated in the range of $175-$250 million (prior view: $225-$275 million). The effective tax rate is predicted in the range of 24.525.5% (prior view: 25-26%). Weighted average shares outstanding are projected in the range of 62-62.2 million (prior view: 62.5-62.6 million).

Currently, MAXIMUS carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Snapshots

Within the broader Business Services sector, ManpowerGroup Inc. MAN, Omnicom Group Inc. OMC and Equifax Inc. EFX recently reported first-quarter 2022 results.

ManpowerGroup reported impressive first-quarter 2022 results, with both earnings and revenues beating the Zacks Consensus Estimate. Quarterly adjusted earnings of $1.88 per share beat the consensus mark by 20.5% and improved 69.4% year over year. Revenues of $5.14 billion surpassed the consensus mark by 0.7% and inched up 4.5% year over year on a reported basis and 9.8% on a constant-currency (cc) basis.

Omnicom reported impressive first-quarter 2022 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Earnings of $1.39 per share beat the consensus mark by 8.6% and increased 4.5% year over year, driven by a strong margin performance. Total revenues of $3.4 billion surpassed the consensus estimate by 5.4% but declined slightly year over year.

Equifax reported better-than-expected first-quarter 2022 results. Adjusted earnings of $2.22 per share beat the Zacks Consensus Estimate by 3.3% and improved 13% on a year-over-year basis. Revenues of $1.36 billion outpaced the consensus estimate by 2.4% and improved 12.4% year over year on a reported basis and 13% on a local-currency basis.


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