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Genpact (G) Surpasses Earnings and Revenue Estimates in Q2

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Genpact Limited (G - Free Report) delivered impressive second-quarter 2019 results, with earnings and revenues beating the Zacks Consensus Estimate.

The stock has gained 8.4% since the earnings release on encouraging revenue guidance for 2019. Management guided revenues in the range of $3.46 to $3.5 billion, which is above the current Zacks Consensus Estimate of $3.38 billion and the previous guidance of $3.33-$3.39 billion. The current guidance indicates year-over-year growth of almost 15-17% on a reported basis and 16-18% at constant-currency (cc).

The stock has gained 55.4% year to date, significantly outperforming the 29% rally of the industry it belongs to.

Quarterly adjusted earnings per share of 49 cents outpaced the consensus mark by 2 cents and increased 20% year over year. Higher operating profit had a positive impact of 11 cents on the bottom line. However, the upside was partially offset by a negative impact of a penny each related to lower foreign exchange balance sheet remeasurement gains, higher net interest expense and higher effective tax rate.

Revenues amounted to $882 million, which beat the consensus estimate by $57 million and improved 21% year over year on a reported basis and 22% on constant-currency  basis. The top line was driven by large deal ramps and ongoing transformation services wins.

Genpact Limited Revenue (TTM)

Let’s check the numbers in detail.

Revenues in Detail

Total BPO revenues (84% of total revenues) increased 23% year over year to $743 million. Total IT revenues (16% of total revenues) came in at $139 million, up 13% year over year.

Global Clients (86% of total revenue) revenues climbed 15% year over year on a reported basis and 16% at cc to $760 million. Global Client BPO revenues of $659 million improved 16% year over year on a reported basis and 17% at cc. Global Client IT revenues grew 7% year over year to $101 million.

General Electric (GE) revenues of $121 million increased 86% year over year. It contributed 14% to total revenues. GE BPO revenues improved 125% year over year to $84 million. GE IT revenues of $38 million increased 34%.

Operating Results

Adjusted income from operations totaled $136 million, up 24% year over year. Adjusted operating income margin increased to 15.4% from 15% in the year-ago quarter.

Selling, general & administrative (SG&A) expenses amounted to $196 million, up 11% year over year. As a percentage of revenues, SG&A expenses were 22.3% compared with 24.2% in the prior-year quarter.

Balance Sheet and Cash Flow

Genpact exited the second quarter with cash and cash equivalents of $378 million compared with $325 million at the end of the previous quarter. Long-term debt (less current portion) totaled $959 million compared with $967 million at the end of the first-quarter.

The company generated $126 million of cash in operating activities in the quarter. Capital expenditures were $16 million.

Genpact returned around $16 million to shareholders through dividend payment in the quarter.

Guidance

Genpact has raised its 2019 EPS guidance. Adjusted EPS is now projected between $2 and $2.02. The Zacks Consensus Estimate is pegged at $2. The prior projection was between $1.96 and $2.00.

Global Client revenues are expected to register 9.5%-11% growth on a reported basis and 10.5-12% rise at cc. The prior expectation was 9.0-10.5% growth on a reported basis and 10.0-11.5% rise at cc.

Adjusted operating income margin is continued to be anticipated around 16%.

Zacks Rank & Stocks to Consider

Genpact currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are ICF International (ICFI - Free Report) , Accenture (ACN - Free Report) and Charles River Associates (CRAI - 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 ICF, Accenture and Charles River is 10%, 10.3% and 13%, respectively.

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