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Why MAXIMUS, Inc. Stock Popped Today

By Steve Symington - Nov 10, 2016 at 5:12PM

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The government health and human services company jumped after a strong quarterly report.

Image source: Maximus, Inc.

What happened

Shares of MAXIMUS Inc. (MMS -1.26%) jumped as much as 11.6% early Thursday, then settled to close down 8.6% after the government health and human services programs company released stronger-than-expected fiscal fourth-quarter 2016 results.

So what

Quarterly revenue grew 8% year over year to $623.1 million, as 9% organic growth and a 1% contribution from acquisitions were only partially offset by a 2% decline related to foreign currency headwinds. That translated to net income of $50.7 million, or $0.77 per diluted share, up from earnings of $0.53 per share in the same year-ago period. MAXIMUS credited its strength during the quarter to favorable results from its appeals and assessments business.

By comparison, analysts' consensus estimates called for lower revenue of $610.5 million and lower earnings of $0.72 per share.

"We are pleased to deliver double-digit revenue and earnings growth for fiscal 2016, and we look for fiscal 2017 to be another year of growth, top and bottom line," added MAXIMUS CEO Richard Montoni. "With a robust pipeline of $4.3 billion, of which approximately 60% is new work, our business development teams are keenly focused on winning new business and cultivating new longer-term opportunities."

Now what

Looking forward, MAXIMUS revealed it expects fiscal 2017 revenue to be between $2.475 billion and $2.550 billion. This accounts for $110 million in unfavorable impacts, including around $50 million from the weak British pound, $20 million from a contract the company has opted not to rebid, and $40 million related to lower volumes from a large healthcare contract under MAXIMUS' Federal Service segment "as the client evaluates the long-term plans for the future program."

On the bottom line, MAXIMUS anticipates diluted earnings per share for the year to be between $2.90 and $3.10. Analysts, on average, were looking for fiscal 2017 revenue and earnings near the high ends of MAXIMUS's respective guidance ranges. But in the end, given the company's relative outperformance this quarter, the circumstances of its guidance shortfall, and the possibility it could be cautiously under-promising with the intention of once again over-delivering, it's no surprise to see MAXIMUS stock climbing higher today.

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