Genpact (G) Down 15.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Genpact (G). Shares have lost about 15.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Genpact due for a breakout? 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 Beats on Q4 Earnings and Revenues

Genpact delivered impressive fourth-quarter 2019 results, with earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings per share of 57 cents outpaced the consensus mark by 1.8% and increased 9.6% year over year. The increase was driven by higher operating profit of 7 cents and positive impact of a penny related to higher foreign exchange balance sheet remeasurement gains, partially offset by higher effective tax rate of 2 cents and increased share count of a penny.

Revenues amounted to $941 million, which beat the consensus estimate by 3.2% and improved 12.7% year over year on a reported basis as well as constant-currency basis. The top line was driven by large deals and growth in transformation services.

Quarter Details

Total BPO revenues (85% of total revenues) increased 14% year over year to $801 million. Total IT revenues (15% of total revenues) came in at $140 million, up 3% year over year.

Global Clients (86% of total revenues) revenues climbed 7% year over year on a reported basis and 8% at cc to $811 million. Global Client BPO revenues of $711 million improved 9% year over year on a reported basis and 10% on a constant-currency basis. Global Client IT revenues grew 4% year over year to $100 million.

General Electric (NYSE:GE) revenues of $129 million increased 61% year over year. It contributed 14% to total revenues. GE BPO revenues improved 81% year over year to $90 million. GE IT revenues of $40 million increased 29%.

Adjusted income from operations totaled $159 million, up 12% year over year. Adjusted operating income margin was 16.9%, flat with the year-ago quarter figure.

Balance Sheet

Genpact exited the fourth quarter with cash and cash equivalents of $467.1 million compared with $368 million at the end of the previous quarter. Long-term debt (less current portion) totaled $1.3 billion compared with $950.9 million at the end of the third quarter.

Genpact returned around $65 million to shareholders through dividend payout and $30 million through share repurchase in 2019.

2020 Guidance

Adjusted EPS is projected between $2.24 and $2.28. The company expects revenues in the range of $3.89-$3.95 billion. Global Client revenues are expected to register 12-14% growth on a reported as well as constant-currency basis. Adjusted operating income margin is continued to be anticipated around 16%.

How Have Estimates Been Moving Since Then?

Estimates revision followed a flat path over the past two months.

VGM Scores

At this time, Genpact has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Genpact has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.