On Thursday, Stifel adjusted its outlook on MAXIMUS, Inc. (NYSE: MMS), increasing the company's price target from $105.00 to $110.00 while maintaining a Buy rating. The adjustment follows MAXIMUS's reported adjusted earnings per share (EPS) of $1.57 for the second fiscal quarter, surpassing the consensus estimate of $1.30 and Stifel's own forecast of $1.27. The company's revenue also exceeded expectations, coming in at $1.35 billion compared to the anticipated $1.29 billion.
The strong financial performance was attributed to the growth in medical disability exams and Medicaid redetermination volumes, which propelled MAXIMUS to exceed both the street's and Stifel's projections. The robust results have led the company's management to revise its guidance upward for the second time this year, with adjustments including a 7.5% increase in adjusted EPS at the midpoint, a 1.5 percentage point rise in sales, and a 7.7% boost in free cash flow (FCF).
In response to the positive outlook, MAXIMUS began the third fiscal quarter by repurchasing $20 million of its shares, a move supported by the company's strong FCF expectations and a net leverage position of 1.7 times. Stifel's analysis indicates that MAXIMUS is on course to achieve approximately 12% adjusted operating margins in the medium term, up from around 10.6% in FY24.
The firm's analysts believe that if MAXIMUS can enhance its margin outlook in conjunction with mid-single-digit organic growth, the market could anticipate higher earnings and an expansion in the company's multiple. This optimistic assessment underscores Stifel's confidence in MAXIMUS's potential for continued financial success and stock performance.
InvestingPro Insights
InvestingPro data shows that MAXIMUS, Inc. (NYSE: MMS) holds a market capitalization of $5.1 billion, with a P/E ratio sitting at 21.82, indicating a valuation that investors may consider reasonable given the company's earnings. Notably, the company's revenue for the last twelve months as of Q1 2024 stands at approximately $4.98 billion, reflecting a growth of 5.35%, which aligns with the strong financial performance highlighted by Stifel.
InvestingPro Tips suggest that MAXIMUS is expected to see net income growth this year, which complements Stifel's upward revision of the company's financial guidance. Additionally, the company's track record of maintaining dividend payments for 20 consecutive years, coupled with a current dividend yield of 1.43%, may appeal to income-focused investors. For those seeking further insights, there are additional InvestingPro Tips available, which could provide a deeper analysis of MAXIMUS's financial health and prospects.
Interested readers looking to expand their investment strategy with MAXIMUS can explore these insights further on InvestingPro. To enhance their experience, users may use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more valuable investment tips.
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