Should Maximus Stock be in Your Portfolio Pre-Q3 Earnings?

Maximus, Inc. MMS will report third-quarter fiscal 2024 results on Aug 7, after the bell.

The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at $1.47, indicating 88.5% growth from the year-ago reported quarter. The consensus estimate for revenues is pegged at $1.3 billion, indicating 7.4% year-over-year growth.

Earnings and revenues are expected to increase 51.2% and 6.8%, respectively, in fiscal 2024 and 2025. There has been no change in analyst estimates or revisions lately.

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The company's earnings surprise history has not been impressive. Earnings missed the Zacks Consensus Estimate in two of the trailing four quarters and surpassed twice, with an average negative surprise of 2.7%.

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Lesser Chance of Q3 Earnings Beat

Our proven model doesn't conclusively predict an earnings beat for MMS this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here.

MMS has an Earnings ESP of 0.00% and a Zacks Rank #3.

Strong Operations in the U.S. Should be the Driver in Q3

We expect that year-over-year improvement in the company's top line in the to-be-reported quarter will be driven by an increase in the U.S. Federal Services and U.S. Services segment's revenues, partially offset by weakness in Outside the U.S. segment.

The consensus estimate for the U.S. Federal Services revenues is pegged at $652.7 million, indicating 11.8% year-over-year growth. The consensus mark for the U.S. Services revenues is pegged at $475.9 million, indicating 6% year-over-year growth. The consensus mark for the Outside the U.S. Services revenuesis pegged at $147.8 million, indicating a 5% year-over-year decline.

MMS' operating loss in the to-be-reported quarter is expected to be $2.93 million, a significant contraction from a loss of $24 million reported in the year-ago quarter.

The Stock is Rallying

MMS shares have surged 16.2% over the past six months. This performance has significantly outpaced the 5.6% rise of its industry and the 8.5% rally of the Zacks S&P 500 composite. Among its close competitors, Booz Allen Hamilton BAH has gained 1.5% and Accenture ACN has dipped 12.7% over the same period.

Six-Month Price Performance

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Investment Thoughts

With more than 40 years of experience, Maximus has become a leading global operator of government health and human services programs. Its expertise in business process management and ability to deliver cost-effective, efficient solutions make it a valuable partner for governments. Maximus has strong relationships and a solid reputation with governments, leading to predictable recurring revenue from long-term contracts. The company seeks long-term client relationships in existing and new markets and is expanding in clinical services and long-term services. Rising longevity and complex health needs boost demand for its services.

Maximus' commitment to shareholder returns offers investors long-term wealth growth. The company paid cash dividends of around $68 million annually in recent fiscal years.

Wait for a Better Entry Point

MMS' strong standing as a technology leader, facilitating the transformation of government programs to become dynamic and integrated, indicates significant long-term growth potential, but timing the market entry is crucial for maximizing investment returns.

While MMS remains fundamentally strong, a more advantageous entry point could emerge if the stock undergoes some correction that may begin soon, especially when MMS does not seem poised for an earnings beat this season.

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