It has been about a month since the last earnings report for Genpact (G - Free Report) . Shares have added about 8.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Genpact due for a pullback? 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 catalysts.
Genpact Beats on Q4 Earnings and Revenue Estimates
Genpact delivered impressive fourth-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate.
Adjusted earnings per share of 52 cents in the quarter outpaced the consensus mark by 4 cents and increased 21% year over year. The bottom line was driven by a positive impact of 11 cents from higher operating profits and a penny from lower share count, which were, however, partially offset by a tax impact of 3 cents due to the U.S. tax laws.
Revenues amounted to $835 million, which beat the consensus estimate by $25.6 million and improved 14% year over year on a reported basis and15% on a constant-currency (cc) basis. The top line was driven by strong growth in the company’s Hi-tech, consumer goods and retail and manufacturing verticals.
Revenues in Detail
Total BPO revenues (84% of total revenues) increased 14% year over year to $700 million. Total IT revenues (16% of total revenues) totaled $135 million, up 12% year over year.
Global Clients (90% of total revenue) revenues climbed 13% year over year on a reported basis and 14% at cc to $755 million.
Under Global Client, Global Client BPO revenues of $650 million improved 13% year over year on a reported basis and 14% at cc. Global Client IT revenues grew 11% year over year to $105 million.
General Electric (GE) revenues of $80 million increased24% year over year. It contributed 10% total revenues.
GE BPO revenues improved 30% year over year to $50 million. GE IT revenues of $31 million increased 16% from the year-ago quarter’s number.
Adjusted income from operations totaled $142 million, up 24% year over year. Adjusted operating income margin increased to 17% from 15.7% in the year-ago quarter.
Selling, general & administrative (SG&A) expenses amounted to $178.58 million, down 5.4% year over year. As a percentage of revenues, SG&A expenses were 21.4% compared with 25.7% in the prior-year quarter.
Balance Sheet and Cash Flow
Genpact exited the fourth quarter with cash and cash equivalents of $504.47 million compared with $401.23 million at the end of the previous quarter. Long-term debt (less current portion) totaled $1 billion compared with $983.88 million at the end of third-quarter 2018.
The company generated $136.71 million of cash from operating activities in the reported quarter. Capital expenditures were $13.9 million.
Genpact returned almost $215 million to shareholders through share repurchase and dividend payment in 2018.
For 2019, Genpact expects revenues in the range of $3.33-$3.39 billion, which indicates year-over-year growth of almost 11-13% on a reported basis and 12-14% at cc. Global Client revenues are expected to register 9.0-10.5% growth on a reported basis and 10.0-11.5% ris eat cc. Adjusted operating income margin is anticipated to be around 16%. Adjusted earnings are projected between $1.96 and $2.00.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -6.19% due to these changes.
Currently, Genpact has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the 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.
Genpact has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.