Atos shares rise after Q3 results meet expectations, outlook reaffirmed

Investing.com — Shares of Atos (EPA:ATOS) rose on Thursday following the company’s third-quarter results, which were broadly in line with market expectations. 

At 8:47 am (1247 GMT), Atos was trading 1.7% higher. 

Atos’s revenue for the quarter amounted to €2,305 million, slightly falling short of Morgan Stanley’s estimates but exceeding consensus predictions by 1%. This was marked by a reported organic growth decline of 4.4% year-over-year.

The company’s segment breakdown showed mixed results. Eviden, Atos’s digital services division, generated €1,093 million in revenue, reflecting a steeper organic decline of 6.4%. 

This segment faced challenges primarily due to a slowdown in the Americas and Central Europe, as well as reductions in contract scopes.

In contrast, Atos’s Tech Foundations segment reported revenue of €1,212 million, down 2.6% organically, indicating a more stable performance in comparison.

Despite these declines, Atos reaffirmed its financial outlook for fiscal year 2024, expecting results to align with the business plan released in early September. 

The company expects an organic revenue decrease in the mid-single-digit percentage range, translating to expected revenues of €9.7 billion for the year. 

Additionally, operating margins are projected at about €238 million, excluding further provisions related to underperforming contracts. 

Atos reported a net debt of €4.6 billion at the end of the third quarter, flagging a reduction of €1.6 billion in working capital since December 2023.

The company also reported a decrease in order entry, which stood at €1.5 billion for the quarter, resulting in a book-to-bill ratio of 0.66, down from 0.84 in the previous year. 

This trend reflects a cautious market environment, although the company remains focused on its strategic restructuring efforts.

Atos is currently awaiting a decision from the court regarding its pre-arranged financial restructuring plan, with closure expected by late December 2024 or early January 2025. 

Morgan Stanley analysts see potential upside risks related to the rapid restructuring of Tech Foundations and a quicker turnaround of business operations. 

However, there are lingering concerns about high uncertainty surrounding free cash flow in the coming years and the liabilities that could impact the company’s financial health, even after the anticipated debt-to-equity swap.