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Genpact (G) Surpasses Q3 Earnings and Revenue Estimates

Zacks Equity Research

Genpact Limited G delivered impressive third-quarter 2019 results, with earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings per share of 56 cents outpaced the consensus mark by 8% and increased 17% year over year. The increase was driven by higher operating profit of 7 cents and a lower effective tax rate of 2 cents, partially offset by negative impact of a penny related to lower foreign exchange balance sheet remeasurement gains and higher net interest expense.

Revenues amounted to $889 million, which beat the consensus estimate by 2% and improved 19% year over year on a reported basis as well as constant-currency basis. The top line was driven by large deals and growth in transformation services.

The stock has gained 48.4% year to date, significantly outperforming the 26.8% 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 20% year over year to $749 million. Total IT revenues (16% of total revenues) came in at $139 million, up 12% year over year.

Global Clients (86% of total revenues) revenues climbed 12% year over year on a reported basis and 13% at cc to $768 million. Global Client BPO revenues of $666 million improved 14% year over year on a reported as well as constant-currency basis. Global Client IT revenues grew 4% year over year to $102 million.

General Electric (GE) revenues of $121 million increased 88% year over year. It contributed 14% to total revenues. GE BPO revenues improved 124% year over year to $83 million. GE IT revenues of $38 million increased 38%.

Genpact Limited Revenue (TTM)

 

Genpact Limited Revenue (TTM)

Genpact Limited revenue-ttm | Genpact Limited Quote

Operating Results

Adjusted income from operations totaled $142 million, up 15% year over year. Adjusted operating income margin decreased to 16% from 16.6% in the year-ago quarter.

Selling, general & administrative (SG&A) expenses amounted to $195 million, up 16% year over year. As a percentage of revenues, SG&A expenses were 21.9% compared with 22.5% in the prior-year quarter.

Balance Sheet and Cash Flow

Genpact exited the third quarter with cash and cash equivalents of $368 million compared with $378 million at the end of the previous quarter. Long-term debt (less current portion) totaled $976 million compared with $959 million at the end of the second quarter.

The company generated $220 million of cash from operating activities in the quarter. Capital expenditures were $25 million.

Genpact returned around $16 million to shareholders through dividend payout and $24 million through share repurchase in the quarter.

Guidance

Genpact has raised its 2019 EPS guidance. Adjusted EPS is now projected between $2.02 and $2.04. The Zacks Consensus Estimate is pegged at $2.03. The prior projection was between $2 and $2.02.

The company continues to expect revenues in the range of $3.46-$3.5 billion, the midpoint ($3.48 million) of which is below the current Zacks Consensus Estimate of $3.49 billion.

Global Client revenues are expected to register 9.5%-11% growth on a reported basis and 10.5-12% rise at cc.

Adjusted operating income margin is continued to be anticipated around 16%.

Zacks Rank & Stocks to Consider

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 Global Payments GPN, Mastercard MA and Cardtronics CATM. While Global Payments sports a Zacks Rank #1, Mastercard and Cardtronics carry a Zacks Rank #2 (Buy).

Long-term expected EPS (three to five years) growth rate for Global Payments, Mastercard and Cardtronics is 17%, 16% and 4%, respectively.

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