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Why Is Genpact (G) Up 1.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Genpact (G). Shares have added about 1.1% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

Genpact Surpasses Q1 Earnings and Revenues Estimates

Genpact reported better-than-expected first-quarter 2021 results.

Quarterly adjusted EPS of 59 cents outpaced the Zacks Consensus Estimate by 20.4% and inched up 11.3% year over year. Revenues amounted to $946.1 million, which beat the consensus estimate by 2.3% and increased 2.5% year over year on a reported as well as on a constant-currency (cc) basis. The top line was aided by strength in Global Clients business.

Quarter Details

Global Clients (90% of total revenues) revenues climbed 6% year over year on a reported and 5% at cc to $853 million.  The upside was driven by strong growth in Transformation Services. 

General Electric revenues of $93 million declined 24% year over year and contributed 10% to total revenues. The downside was mainly due to productivity commitments and macroeconomic impact.  

Adjusted income from operations totaled $163 million, up 20% year over year. Adjusted operating income margin of 17.2% moved up 250 basis points (bps) year over year.

Genpact exited the quarter with cash and cash equivalents of $644 million compared with $680 million recorded at the end of the previous quarter. Long-term debt totaled $1.6 billion compared with $1.3 billion recorded in the prior quarter.

The company generated $77.2 million of cash from operating activities and capex was $12 million. Genpact returned $89.8 million to shareholders through share repurchases and $20 million through dividends in the quarter.

Revised 2021 Guidance

For the full year, adjusted earnings per share are (EPS) currently anticipated in the range of $2.27-2.30 per share (previous guidance: $2.26-2.29 per share). Revenues for 2021 are anticipated to be between $3.93 and $3.99 billion. The company currently expects Global Clients revenue growth to be 9-11% (previous guidance: 8-10%) and at cc it is expected to grow 8-10% (previous guidance: 7-9%). Adjusted income from operations margin is still expected to be approximately at 16%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Genpact has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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