It has been more than a month since the last earnings report for Genpact Limited (G - Free Report) . Shares have lost about 3.1% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Genpact's second-quarter 2017 non-GAAP earnings of 43 cents per share increased 19.4% year over year and beat the Zacks Consensus Estimate by 7 cents. Revenues of $671 million increased 6.4% from the year-ago quarter.
Global clients (91% of total revenue) revenues increased 14% (15% at constant currency) to almost $608 million.The increase was driven by strength across industry verticals – banking, manufacturing, life sciences, insurance, CPG and high-tech, that in turn helped Global client BPO revenues to jump 16% (18% at constant currency) to $511 million.
Global Client IT revenues were up 2% year over year to $97 million, driven by stabilizing investment banking industry. The industry has been facing challenging business conditions over the past several quarters.
Revenues from General Electric (GE) fell 34% to roughly $63 million (9% of total revenue) mainly due to phase-out of work related to GE Capital divestitures.
BPO revenues (83% of total revenues) increased 9% year over year to $556 million. The growth was mainly driven by strength across Genpact’s most of the targeted verticals, service lines and geographies and strong transformational services.
However, GE BPO revenues were down 36% year over year to $45 million. IT revenues were also down 5% year over year to $114 million. GE IT revenues decreased 29% over year to $18 million.
Gross margin contracted 110 basis points (bps) from the year-ago quarter to 38.1%. Selling, general & administrative (SG&A) expense also decreased 120 bps to 25%.
Non-GAAP operating margin (including stock based compensation) expanded 170 bps from the year-ago quarter to 13.6%.
Balance Sheet & Share Repurchase
As of Jun 30, 2017, cash & cash equivalents were $441.1 million compared with $388.1 million as of Mar 31. The company has a long-term debt of $1026 million.
The company generated cash flow of $115.3 million from operating activities and spent about $23.5 million on dividends.
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.
Global Client revenues for 2017 are now expected to grow approximately 6% to 9% 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.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the past month as none of them issued any earnings estimate revisions.
At this time, the stock has an average Growth Score of C, while its Momentum is lagging a lot with an F. Meanwhile, the stock was allocated a grade of B on the value side, putting it in the top second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than and growth investors.
Notably, the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.