Amdocs Should Gain Following Citi Estimates Boost

Includes: DOX, S
by: Notable Calls

Citigroup is out very positive on Amdocs Ltd (NYSE:DOX) raising its revenue estimates above consensus for the rest of this year. Citi's new FY08 EPS estimate is also modestly above consensus. The Firm believes that the progress DOX has made on its Sprint (NYSE:S) 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. Reiterates Buy and $46 target.

For each of the next 3 quarters, Citi's estimates are now $6-$10 million above consensus for revenue - the Firm also believes that there is potential upside to 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 its 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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