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Genpact Limited (G - Free Report) reported first-quarter 2017 non-GAAP earnings (including share based compensation) of 29 cents per share, which came in line with the Zacks Consensus Estimate and remained flat year over year.
Revenues increased 2.2% from the year-ago quarter to almost $623 million. Global clients (89% of total revenue) revenues increased 8% (9% at constant currency) to almost $554 million, while revenues from General Electric (GE - Free Report) fell 28% to roughly $69 million (11% of total revenue).
Shares moved up almost 2% in the last couple of trading sessions following the results. We note that Genpact has outperformed the Zacks Outsourcing industry on a year-to-date basis. While the stock gained 4.9%, the industry lost 7.9%.
Revenue Details
BPO revenues (82.1% of total revenues) advanced 5% year over year to $511 million. Global client BPO revenues jumped almost 7% (9% at constant currency). Digital transformation engagements grew almost 20% during the quarter and currently represent about 20% of total revenue.
However, global client ITO revenues declined 5% in the reported quarter, mostly due to the impact of the reduction in discretionary spending on legacy IT projects during the second half of 2016 in the capital markets and health care industries.
For the three-month period ending Mar 31, 2017, the number of clients with annual revenues over $5 million increased to 110 from 104 in the year-ago quarter. This includes 18 clients with more than $25 million in annual revenues.
Gross margin contracted 40 basis points (bps) from the year-ago quarter to 38.5%. Selling, general & administrative (SG&A) expense also decreased 40 bps to 25.8%.
Non-GAAP operating margin (including stock based compensation) expanded 20 bps from the year-ago quarter to 13.3% driven by higher gross margin base.
Balance Sheet & Share Repurchase
As of Mar 31, 2016, cash & cash equivalents were $388.1 million compared with $422 million as of Dec 31.
During the quarter, the company repurchased approximately 9 million shares for $220 million, at an average price of $24.33 per share.
Guidance
For full-year 2017, revenues are now anticipated in the range of $2.63–$2.7 billion. Net foreign exchange adverse impact is now expected to be approximately $33 million, down from the company’s previous outlook of $43 million.
Global Client revenues for 2017 are now expected to grow approximately 6% to 9% on a constant currency basis, while Global Client BPO growth is expected to be 11% on a constant currency basis.
Non-GAAP operating income margin is expected to be 15.7%. Earnings are anticipated to be in the range of $1.53–$1.57 per share.
Capital expenditure is anticipated to be nearly 3% to 3.5% of total revenue.
MercadoLibre and Axcelis Technologies’ earnings are anticipated to grow 26.07% and 20% respectively, over the long term.
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Genpact (G) Posts In-Line Q1 Earnings, Revenues Rise Y/Y
Genpact Limited (G - Free Report) reported first-quarter 2017 non-GAAP earnings (including share based compensation) of 29 cents per share, which came in line with the Zacks Consensus Estimate and remained flat year over year.
Revenues increased 2.2% from the year-ago quarter to almost $623 million. Global clients (89% of total revenue) revenues increased 8% (9% at constant currency) to almost $554 million, while revenues from General Electric (GE - Free Report) fell 28% to roughly $69 million (11% of total revenue).
Shares moved up almost 2% in the last couple of trading sessions following the results. We note that Genpact has outperformed the Zacks Outsourcing industry on a year-to-date basis. While the stock gained 4.9%, the industry lost 7.9%.
Revenue Details
BPO revenues (82.1% of total revenues) advanced 5% year over year to $511 million. Global client BPO revenues jumped almost 7% (9% at constant currency). Digital transformation engagements grew almost 20% during the quarter and currently represent about 20% of total revenue.
However, global client ITO revenues declined 5% in the reported quarter, mostly due to the impact of the reduction in discretionary spending on legacy IT projects during the second half of 2016 in the capital markets and health care industries.
For the three-month period ending Mar 31, 2017, the number of clients with annual revenues over $5 million increased to 110 from 104 in the year-ago quarter. This includes 18 clients with more than $25 million in annual revenues.
Genpact Limited Price and EPS Surprise
Genpact Limited Price and EPS Surprise | Genpact Limited Quote
Operating Details
Gross margin contracted 40 basis points (bps) from the year-ago quarter to 38.5%. Selling, general & administrative (SG&A) expense also decreased 40 bps to 25.8%.
Non-GAAP operating margin (including stock based compensation) expanded 20 bps from the year-ago quarter to 13.3% driven by higher gross margin base.
Balance Sheet & Share Repurchase
As of Mar 31, 2016, cash & cash equivalents were $388.1 million compared with $422 million as of Dec 31.
During the quarter, the company repurchased approximately 9 million shares for $220 million, at an average price of $24.33 per share.
Guidance
For full-year 2017, revenues are now anticipated in the range of $2.63–$2.7 billion. Net foreign exchange adverse impact is now expected to be approximately $33 million, down from the company’s previous outlook of $43 million.
Global Client revenues for 2017 are now expected to grow approximately 6% to 9% on a constant currency basis, while Global Client BPO growth is expected to be 11% on a constant currency basis.
Non-GAAP operating income margin is expected to be 15.7%. Earnings are anticipated to be in the range of $1.53–$1.57 per share.
Capital expenditure is anticipated to be nearly 3% to 3.5% of total revenue.
Zacks Rank & Key Picks
Genpact has a Zacks Rank #2 (Buy). Top-ranked stocks in the broad business sector are MercadoLibre, Inc. (MELI - Free Report) and Axcelis Technologies, Inc (ACLS - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
MercadoLibre and Axcelis Technologies’ earnings are anticipated to grow 26.07% and 20% respectively, over the long term.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public. Starting today, for the next month, you can follow all Zacks' private buys and sells in real time.
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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