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Genpact (G) Benefits From Acquisitions, Debts on the Rise
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Genpact Limited (G - Free Report) gains from the launch of artificial intelligence (AI) platform as well as acquisitions that expand customer base and boost the top line.
Recently, the company delivered mixed figures in third-quarter 2018 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. Adjusted earnings per share (EPS) of 48 cents outpaced the consensus mark and the year-ago quarter’s figure by 2 cents. Revenues of $747.97 million missed the consensus estimate by $8.1 million. Nevertheless, the top line was up 5.5% year over year on a reported basis and 6% on a constant-currency basis.
Genpact has an impressive surprise history. The company beat estimates in each of the trailing four quarters, the average being 4.3%. For the fourth quarter, the consensus estimate was unchanged at 48 cents in the past 60 days.
Acquisitions: A Key Growth Strategy
Acquisitions are Genpact’s most favored mode for expanding product portfolio as well as gaining domain expertise. They have enabled the company to strengthen foothold in mobile technology, dynamic workflow solution, life sciences and banking operations.
In August, the company completed the purchase of Barkawi Management Consultants and certain affiliated entities in the United States, Germany and Austria to expand global supply chain management transformation expertise. In July, the company acquired Commonwealth Informatics. The acquisition is expected to boost Genpact pharmacovigilance artificial intelligence (PVAI) suite of capabilities.
Furthermore, in 2017, the company acquired TandemSeven in September, BrightClaim and their associated company, National Vendor in May and Rage Frameworks in April. Genpact’s other notable acquisitions include U.S. Delivery Center, OnSource, LeaseDimensions, IT business of Birlasoft, Endeavour Software, Strategic Sourcing Excellence (SSE), PNMSoft Limited, Hitachi Management and Pharmalink Consulting.
Genpact Cora
AI presents significant growth opportunity to Genpact. The company’s artificial intelligence (AI) platform — Genpact Cora — is an automation to AI-based platform that combines the company’s proprietary automation, analytics, and AI technologies into a single common platform. It has a modular, interconnected network of technologies that enables clients to better tackle specific operational business challenges. The platform is helping the company to provide related offerings to industries like consumer-packaged goods, industrial engineering, life sciences and high tech.
Per an IDC report, worldwide spending on cognitive systems and AI will reach $77.6 billion at a CAGR of 37.3% over the 2017-2021 period. We believe that Genpact is well positioned to benefit from the projected improvement in the AI space.
Consistent Rewards to Shareholders
Genpact’s efforts to reward shareholders in the form of share repurchases and dividends reflect the company’s commitment to create value for shareholders and confidence in business. In the first nine months 2018, the company paid $42.90 million in dividends and repurchased shares worth $130.10 million. As of Sep 30, 2018, the company had $328 million available for share repurchases under the existing share repurchase program.
Previously, the company repurchased shares worth $219.78 million in 2017, $345.20 million in 2016 and $226.92 million in 2015. It paid $46.68 million in dividends in 2017.
Risks
The global outsourcing services industry has been unstable over the past few years. A report from statista shows that market size of $88.9 billion in 2017 was same as in 2015 and improved from $76.9 billion in 2016. However, it marks a steep decline from $104.6 billion in 2014. While increasing demands for technology expertise, efficiency and cost reduction has kept revenues in good shape, heightened trade war tensions are currently a concern. Increasing U.S. protectionism is hurting growth prospects of this industry. Genpact, being one of the companies in the outsourcing industry, is likely to get affected by these factors.
Genpact’s balance sheet is highly leveraged. As of Sep 30, 2018, the company had total debt of $983.88 million, while cash and cash equivalents were $401.23 million. Frequent acquisitions have negatively impacted the company’s balance sheet.
In a year’s time, shares of the company have declined 6.1%, against the industry’s rise of 10.9%.
The long-term expected EPS (three to five years) growth rate for Robert Half International, WEX and BG Staffing is 13.3%, 15%, and 20%, respectively.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Genpact (G) Benefits From Acquisitions, Debts on the Rise
Genpact Limited (G - Free Report) gains from the launch of artificial intelligence (AI) platform as well as acquisitions that expand customer base and boost the top line.
Recently, the company delivered mixed figures in third-quarter 2018 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. Adjusted earnings per share (EPS) of 48 cents outpaced the consensus mark and the year-ago quarter’s figure by 2 cents. Revenues of $747.97 million missed the consensus estimate by $8.1 million. Nevertheless, the top line was up 5.5% year over year on a reported basis and 6% on a constant-currency basis.
Genpact has an impressive surprise history. The company beat estimates in each of the trailing four quarters, the average being 4.3%. For the fourth quarter, the consensus estimate was unchanged at 48 cents in the past 60 days.
Acquisitions: A Key Growth Strategy
Acquisitions are Genpact’s most favored mode for expanding product portfolio as well as gaining domain expertise. They have enabled the company to strengthen foothold in mobile technology, dynamic workflow solution, life sciences and banking operations.
In August, the company completed the purchase of Barkawi Management Consultants and certain affiliated entities in the United States, Germany and Austria to expand global supply chain management transformation expertise. In July, the company acquired Commonwealth Informatics. The acquisition is expected to boost Genpact pharmacovigilance artificial intelligence (PVAI) suite of capabilities.
Furthermore, in 2017, the company acquired TandemSeven in September, BrightClaim and their associated company, National Vendor in May and Rage Frameworks in April. Genpact’s other notable acquisitions include U.S. Delivery Center, OnSource, LeaseDimensions, IT business of Birlasoft, Endeavour Software, Strategic Sourcing Excellence (SSE), PNMSoft Limited, Hitachi Management and Pharmalink Consulting.
Genpact Cora
AI presents significant growth opportunity to Genpact. The company’s artificial intelligence (AI) platform — Genpact Cora — is an automation to AI-based platform that combines the company’s proprietary automation, analytics, and AI technologies into a single common platform. It has a modular, interconnected network of technologies that enables clients to better tackle specific operational business challenges. The platform is helping the company to provide related offerings to industries like consumer-packaged goods, industrial engineering, life sciences and high tech.
Per an IDC report, worldwide spending on cognitive systems and AI will reach $77.6 billion at a CAGR of 37.3% over the 2017-2021 period. We believe that Genpact is well positioned to benefit from the projected improvement in the AI space.
Consistent Rewards to Shareholders
Genpact’s efforts to reward shareholders in the form of share repurchases and dividends reflect the company’s commitment to create value for shareholders and confidence in business. In the first nine months 2018, the company paid $42.90 million in dividends and repurchased shares worth $130.10 million. As of Sep 30, 2018, the company had $328 million available for share repurchases under the existing share repurchase program.
Previously, the company repurchased shares worth $219.78 million in 2017, $345.20 million in 2016 and $226.92 million in 2015. It paid $46.68 million in dividends in 2017.
Risks
The global outsourcing services industry has been unstable over the past few years. A report from statista shows that market size of $88.9 billion in 2017 was same as in 2015 and improved from $76.9 billion in 2016. However, it marks a steep decline from $104.6 billion in 2014. While increasing demands for technology expertise, efficiency and cost reduction has kept revenues in good shape, heightened trade war tensions are currently a concern. Increasing U.S. protectionism is hurting growth prospects of this industry. Genpact, being one of the companies in the outsourcing industry, is likely to get affected by these factors.
Genpact’s balance sheet is highly leveraged. As of Sep 30, 2018, the company had total debt of $983.88 million, while cash and cash equivalents were $401.23 million. Frequent acquisitions have negatively impacted the company’s balance sheet.
In a year’s time, shares of the company have declined 6.1%, against the industry’s rise of 10.9%.
Zacks Rank & Other Key Picks
Currently, Genpact carries a Zacks Rank #3 (Hold). A few other better-ranked stocks in the broader Business Services sector are Robert Half International Inc. (RHI - Free Report) , WEX Inc. (WEX - Free Report) and BG Staffing, Inc. (BGSF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected EPS (three to five years) growth rate for Robert Half International, WEX and BG Staffing is 13.3%, 15%, and 20%, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>