Genpact (G) Beats On Q1 Earnings, Lifts '18 EPS Guidance

Genpact Limited (NYSE:G) reported better-than-expected results in first-quarter 2018.

Non-GAAP earnings of 39 cents per share increased 26% on a year-over-year basis. The figure surpassed the Zacks Consensus Estimate by a couple of cents.

Revenues of $688.9 million increased 11% (up 9% on a constant currency basis) from the year-ago quarter. Revenues also steered past the Zacks Consensus Estimate of $682.2 million.

The company’s artificial intelligence (AI) based platform called Genpact Cora and the recent acquisitions are proving beneficial for the top line.

Genpact’s domain expertise in business analytics, digital and consulting sectors is a key catalyst. Notably, management is positive about the growing pipeline on the back of increasing adoption of the company’s transformation services. The enthusiastic approach of the C-level of different companies in transforming business models through digital, data and analytics is turning out to be a positive. Additionally, supply chain management is another sector where the company has growth opportunities.

We believe its diverse portfolio, enhanced by the offerings of the acquired organizations, will provide Genpact with a competitive edge over peers like Cognizant Technology Solutions (NASDAQ:CTSH) and Accenture.

Genpact has gained 28.1% in a year’s time, outperforming the 19.5% rally of the industry it belongs to.

Let’s delve deeper in to the numbers.

Quarter Details

Total BPO revenues (83% of total revenues) increased 12% year over year to $574 million. Total IT services revenues (17% of total revenues) were up 3% year over year to $115 million.

Global Client (92% of total revenue) revenues increased 14% (12% at constant currency) to $631 million driven by the Transformation services that grew at a mid-teen rate.

Global Client BPO segment revenues of $540 million recorded 17% (15% at constant currency) growth on the back of robust performance of industry verticals like insurance, banking and financial services, and high tech.

Global Client IT revenues were down 1% year over year to $91 million. The industry has been facing challenging business conditions over the past several quarters.

Revenues from General Electric (NYSE:GE) represented around 8% of total revenues and fell 16% during the quarter to $58 million, primarily due to the decline in GE Capital business in 2017. GE BPO revenues declined 31% year over year to $34 million. GE IT revenues of $24 million increased 19% from the year-ago quarter.

Genpact Limited Revenue (TTM)

Adjusted income from operations during the quarter came in at $97.4 million. Operating margins came in at 14.1%, down 160 basis points (bps) year over year. Selling, general & administrative (SG&A) expenses totaled $171.1 million, up 6.3% year over year. As a percentage of revenues, SG&A expenses came in at 24.8%, compared with 25.8% in the year-ago quarter.

Balance Sheet & Dividend

Genpact ended the quarter with cash and cash equivalents of $504.5 million. The company generated $31 million in cash from operations in the quarter. Long-term debt totaled $1 billion at the end of the quarter. The company repurchased around 3.2 million shares during the quarter for $100 million. It also paid $12 million in dividends.

Guidance

For 2018, Genpact reiterated revenue, Global Client revenue and non-GAAP operating income margin guidance and lifted the adjusted earnings outlook. Revenues are anticipated in the range of $2.93-$3.00 billion.

The Zacks Consensus Estimate is pegged at $2.97 billion. Global Client revenues for 2018 are expected to grow approximately 9-11% on a constant currency basis as well as on a reported basis. Non-GAAP operating income margin is expected at around 15.8%.

Earnings are anticipated in the range of $1.72 to $1.76 per share compared with the previous band of $1.70-$1.74. The Zacks Consensus Estimate is pinned at $1.73.

Zacks Rank & Upcoming Releases

Genpact has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Business Services sector are keenly awaiting earnings reports from key players like Gartner, Inc. (NYSE:IT) , The Dun & Bradstreet Corp. (NYSE:DNB) and Broadridge Financial Solutions Inc. (NYSE:BR) . While Garter and Dun & Bradstreet will release first-quarter 2018 results on May 8 and May 9, respectively, Broadridge will report third-quarter fiscal 2018 numbers on May 8.

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