Genpact (G) Surpasses Q1 Earnings And Revenue Estimates

Genpact Limited (NYSE:G) delivered impressive first-quarter 2019 results, with earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings per share of 43 cents outpaced the consensus mark by 2 cents and increased 10% year over year. The bottom line was driven by a positive impact of 10 cents from higher operating profits, partially offset by a foreign exchange balance sheet remeasurement loss of a penny, tax impact of 2 cents, and higher net interest expense of a penny.

Revenues amounted to $809 million, which beat the consensus estimate by $46 million and improved 17% year over year on a reported basis and 19% on a constant-currency (cc) basis. The top line was driven by strong growth in the company’s High Tech, consumer goods and retail and industrial manufacturing verticals.

The company’s shares have gained 33.6% year to date, significantly outperforming the 23.2% rally of the industry it belongs to.

Let’s check the numbers in detail.

Revenues in Detail

Total BPO revenues (84% of total revenues) increased 19% year over year to $681 million. Total IT revenues (16% of total revenues) came in at $128 million, up 11% year over year.

Global Clients (87% of total revenue) revenues climbed 11% year over year on a reported basis and 12% at cc to $700 million. Global Client BPO revenues of $605 million improved 12% year over year on a reported basis and 14% at cc. Global Client IT revenues grew 5% year over year to $95 million.

General Electric (NYSE:GE) revenues of $109 million increased 88% year over year. It contributed 13% total revenues. GE BPO revenues improved 126% year over year to $76 million. GE IT revenues of $33 million increased 35% from the year-ago quarter’s number.

Genpact Limited Revenue (TTM)

Operating Results

Adjusted income from operations totaled $122 million, up 25% year over year. Adjusted operating income margin increased to 15% from 14.1% in the year-ago quarter.

Selling, general & administrative (SG&A) expenses amounted to $191.4 million, up 11.9% year over year. As a percentage of revenues, SG&A expenses were 23.7% compared with 24.8% in the prior-year quarter.

Balance Sheet and Cash Flow

Genpact exited the first quarter with cash and cash equivalents of $325.4 million compared with $368.4 million at the end of the previous quarter. Long-term debt (less current portion) totaled $966.9 million compared with $975.6 million at the end of fourth-quarter 2018.

The company used $5.4 million of cash in operating activities in the quarter. Capital expenditures were $14.1 million.

Genpact returned almost $16 million to shareholders through dividend payment in the quarter.

Guidance

Genpact reiterated its 2019 guidance. It continues to expect revenues in the range of $3.33-$3.39 billion, which indicates year-over-year growth of almost 11-13% on a reported basis and 12-14% at cc. The Zacks Consensus Estimate is pegged at $3.38 billion.

Global Client revenues are expected to register 9.0-10.5% growth on a reported basis and 10.0-11.5% rise at cc. Adjusted operating income margin is anticipated to be around 16%.

Adjusted earnings are projected between $1.96 and $2.00. The Zacks Consensus Estimate is pegged at $1.99.

Zacks Rank & Upcoming Releases

Genpact currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are WEX (NYSE:WEX) , Automatic Data Processing (NASDAQ:ADP) and FLEETCOR (NYSE:FLT) . While WEX sports a Zacks Rank #1, Automatic Data Processing and FLEETCOR carry a Zacks Rank #2 (Buy).

Long-term expected EPS (three to five years) growth rate for WEX, Automatic Data Processing and FLEETCOR is 15%, 13% and 16.5%, respectively.

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