It has been about a month since the last earnings report for Genpact (G). Shares have added about 3.5% 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 its most recent earnings report in order to get a better handle on the important drivers.
Genpact Surpasses Q1 Earnings Estimates
Genpact reported mixed first-quarter 2023 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.
Adjusted EPS (excluding 11 cents from non-recurring items) of 68 cents outpaced the Zacks Consensus Estimate by 4.6% and increased 13.3% year over year. Revenues of $1.09 billion missed the consensus estimate by 0.6%. However the top line increased 2% year over year on a reported basis and 4% on a constant currency (cc) basis.
Data-Tech-AI services revenues (representing 45% of total revenues) were up 4% year over year on a reported basis and 6% at cc to $485 million.
Digital Operations services revenues of $604 million were up 0.4% year over year (3% at cc) and contributed 55% to total revenues.
Adjusted income from operations totaled $179 million, up 12% year over year. The adjusted operating income margin of 16.4% surged 140 basis points year over year.
Genpact exited the quarter with cash and cash equivalents of $552.3 million compared with $646.8 million recorded at the end of the previous quarter. Long-term debt totaled $1.24 billion compared with $1.25 billion reported in the prior quarter.
The company generated $34.1 billion in cash from operating activities, while capex was $12.6 million. Genpact returned $25.3 million to its shareholders through dividends. G repurchased approximately 631,000 of its common shares worth $30 million at an average price per share of $47.57.
Revenues are anticipated to be between $4.64 billion and $4.71 billion. Adjusted EPS is projected in the range of $2.92-$2.99. Adjusted income from operations margin is expected to be 16.8%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
Currently, Genpact has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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.
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.
Performance of an Industry Player
Genpact is part of the Zacks Outsourcing industry. Over the past month, Automatic Data Processing (ADP), a stock from the same industry, has gained 2.6%. The company reported its results for the quarter ended March 2023 more than a month ago.
ADP reported revenues of $4.93 billion in the last reported quarter, representing a year-over-year change of +9.2%. EPS of $2.52 for the same period compares with $2.21 a year ago.
ADP is expected to post earnings of $1.83 per share for the current quarter, representing a year-over-year change of +22%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for ADP. Also, the stock has a VGM Score of D.
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