Genpact Limited (G - Free Report) reported mixed third-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings per share of 48 cents outpaced the consensus mark and the year-ago figure by 2 cents. The bottom line was driven by a positive impact of 3 cents from higher operating profits and a penny from higher foreign currency exchange re-measurement gains, which were, however, partially offset by a tax impact of almost 3 cents due to the U.S. tax laws.
Revenues came in at $747.97 million, which lagged the consensus estimate by $8.1 million but improved 5.5% year over year on a reported basis and 6% on a constant-currency basis. The top line was driven by strong growth in the company’s high-tech and life sciences verticals and contributions from CPG, manufacturing and healthcare.
So far this year, shares of Genpact have declined 13.7% against the 8.2% rise of the industry it belongs to.
Let’s check out the numbers in detail.
Revenues in Detail
Total BPO revenues (83% of total revenues) increased 7% year over year to $623 million. Total IT revenues (17% of total revenues) of $125 million remained flat year over year.
Global Client (91% of total revenue) revenues climbed 7% year over year on a reported basis and 8% on a constant-currency basis to $683 million.
Under Global Client, Global Client BPO revenues of $586 million improved 8% year over year on a reported basis and 9% on a constant-currency basis. Global Client IT revenues grew 2% year over year to $98 million.
General Electric (GE) revenues of $65 million declined 11% year over year. It accounted for 9% of total revenues.
GE BPO revenues declined 13% year over year to $37 million. GE IT revenues of $27 million decreased 7% from the year-ago quarter number.
Adjusted income from operations totaled $124.19 million, up 7.1% year over year. Adjusted operating income margin increased to 16.6% from 16.4% in the year-ago quarter.
Selling, general & administrative (SG&A) expenses amounted to $168.01 million, down 2.3% year over year. As a percentage of revenues, SG&A expenses were 22.5% compared with 24.3% in the prior-year quarter.
Genpact Limited Price, Consensus and EPS Surprise
Genpact exited the third quarter with cash and cash equivalents of $401.23 million compared with $333.90 million at the end of the previous quarter. Long-term debt (less current portion) totaled $983.88 million compared with $987.31 million at the end of second-quarter 2018.
The company generated $153 million of cash from operating activities in the reported quarter. Capital expenditures, as a percentage of revenues, came in at 5.2%.
Genpact returned almost $14 million to its shareholders through dividend payments (quarterly dividend of 7.5 per share).
For 2018, Genpact continues to expect revenues in the range of $2.95-$3.01 billion, which indicates year-over-year growth of almost 8-10% both on a reported and constant-currency basis. Notably, the Zacks Consensus Estimate of $2.98 billion is in line with the midpoint of the guided range.
Global Client revenues are expected to register 9.5-11.5% growth, both on a reported and constant-currency basis. Adjusted operating income marginis anticipated to be around 15.8%. Effective tax rate is expected to be at the lower end of the 21-22% range.
Adjusted earnings are projected to be at the higher end of the previously guided range of $1.72-$1.76 per share.The Zacks Consensus Estimate stands at $1.75, a penny above the midpoint of the guided range.
Capital expenditure for the full year is expected to lie between 3% and 3.5%.
Zacks Rank & Upcoming Releases
Genpact currently carries a Zacks Rank #2 (Buy). 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 Navigant Consulting (NCI - Free Report) , ABM Industries (ABM - Free Report) and Accenture (ACN - Free Report) . While Navigant will report third-quarter 2018 results on Nov 8, ABM Industries and Accenture are expected to release fourth-quarter fiscal 2018 results on Dec 12 and Dec 20, respectively.
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