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Analyst Blog

WNS (Holdings) Ltd. (WNS - Snapshot Report) reported operating net earnings of 38 cents per share for fiscal third-quarter 2014 ending Dec 31, 2013. Results surpassed the Zacks Consensus Estimate of 33 cents and improved 15.2% year over year. Operating net income increased 41.4% year over year to $19.8 million in the reported quarter.

Net income came in at 23 cents per share compared to 12 cents per share reported in the year-ago quarter.

WNS posted strong constant currency revenue growth and expanded operating and net income margins which stemmed from its growing size of new business pipeline. The company also added four new logos during the quarter.   

Operational Updates

WNS' total revenue grossed $119.6 million in the quarter under review, increasing 5.4% year over year. The upside was driven by better performances in the Banking & Financial Services, Utilities and Shipping & Logistics verticals. Nonetheless, few international currency headwinds weighed on the upside.

Cost of revenue decreased 0.5% year over year to $73.8 million, while selling & marketing expenses increased 13% to $8.7 million in the fiscal third quarter.

WNS’ operating margin was 18.4% in the reported quarter improving 450 basis points (bps) year over year. A strong US dollar and operating leverage aided the expansion.

Financial Updates    

WNS (Holdings) exited the quarter with cash and investments of $122.5 million, up 65% from the fiscal 2013-end level. The company generated $22.6 million of cash from operations and reported $5.7 million of capital expenditure.

Long-term debt of WNS was $29 million at the end of the reported quarter improving 13.9% from the fiscal 2013-end level.

Fiscal 2014 Guidance

WNS (Holdings) expects its top line to grow 8-9% in fiscal 2014 to $470-$472 million.

Operating net income is projected to range between $70 million and $72 million, representing a 32-36% year-over-year increase.

Zacks Rank

WNS presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the business service industry include comScore Inc. (SCOR - Snapshot Report), SouFun Holdings Ltd. (SFUN - Snapshot Report) and Competitive Technologies Inc. (CTTC). All these stocks carry a Zacks Rank #2 (Buy).

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