Thursday, May 29, 2008

Amdocs (NYSE:DOX): Citigroup raising estimates above consensus - Expect upside to stock

Citigroup is out very positive on Amdocs Ltd (NYSE:DOX) raising their revenue estimates above consensus for the rest of this year. Citi's new FY08 EPS estimate is also modestly above consensus. They believe that the progress DOX has made on its Sprint transition and the robust selling environment for telecom support services supports our incrementally bullish stance. DOX should react positively, as it returns to beating consensus revenue estimates after a break of 6 quarters. Reits Buy and $46 DOX.

For each of the next 3 quarters, they are now $6-$10 mil. above consensus for revenues - they also believe that there is potential upside to their estimates if DOX signs incremental business or if Sprint's own turnaround yields results. Citi is also raising FY08 EPS to $2.36 from $2.35, FY09 EPS to $2.63 from $2.60 and FY10 EPS to $2.88 from $2.86.

DOX has begun to deliver on expected 'inflection point' in revenue growth and margins. The perceived risks associated with Sprint should also abate now. The valuation (less than 13x CY08E of $2.43) is quite attractive, given the accelerating growth.

Notablecalls: I think this is a pretty strong call on Citi's part. Expect to see buy interest in the stock today.

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