U.S. Markets close in 19 mins

Genpact (G) Q3 Earnings Surpass Estimates, Revenues Miss

Zacks Equity Research
1 / 3

Genpact (G) Q3 Earnings Surpass Estimates, Revenues Miss

Genpact's (G) third-quarter 2018 earnings and revenues improve on a year-over-year basis.

Genpact Limited G 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.

Operating Results

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 Limited Price, Consensus and EPS Surprise | Genpact Limited Quote

Balance Sheet and Cash Flow

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).

Guidance

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, ABM Industries ABM and Accenture ACN.  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.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
ABM Industries Incorporated (ABM) : Free Stock Analysis Report
 
Accenture PLC (ACN) : Free Stock Analysis Report
 
Navigant Consulting, Inc. (NCI) : Free Stock Analysis Report
 
Genpact Limited (G) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research