Stock under pressure: Genpact Limited (NYSE: G)

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Genpact Limited (NYSE: G) stock lost over 4.2% on Feb 12th, 2018 after-hours session post their FY17 update. The group’s GE revenues fell 19% on a year-over-year basis in fiscal year of 2017 hurt from the phaseout of work related to the GE capital divestitures. This segment contributed less than 10% of their revenues.

On the other hand, the bookings for 2017 rose over 5% yoy to 2.8 billion, which comprised the return of large deals as a meaningful contributor to the bookings for the year. Solid Global Client BPO bookings offset weakness in GE and IT bookings. Overall revenues surged 7%, while Global Client revenues enhanced 11%, and Global Client BPO revenues rose 14% for fiscal year of 2017. Moreover, the adjusted operating income margin rose 20 basis points to 15.7%, while adjusted EPS rose 11% yoy to $1.62. The Global Client revenue growth was driven by verticals, like insurance, CPG, banking, manufacturing, life sciences and high tech leading to a 14% year-over-year constant currency growth in Global Client BPO revenue.

Meanwhile, the growth in their service lines was driven by transformational services which rose 25% during the year, boosted by demand for their digitally-led solutions and digitally-embedded intelligent operations. The Core industry vertical operations and finance and accounting were also strong contributors to their Global Client BPO growth but Global Client ITO fell 2% on a constant-currency basis.

For 2018, the group expects a total revenues to be in the range of $2.93 billion and $3 billion, which is a yoy rise of 7% to 9.5%, both on as reported and constant currency basis. For Global Clients, the group forecasts a revenue growth to be in the range of 9% to 11%. Within Global Clients, the group forecasts the Global Client BPO to rise in the range of 12% to 14% on both, as reported and constant currency basis. However, GE is forecasted to fall in the range of 8% to 10% hurt by weak GE Capital business in 2017.

The group forecasts an adjusted operating margin to improve to 15.8% in 2018 but gross margins would be hurt by over 75 basis points on the rupee appreciation. The group is aiming to invest new digital and analytics capabilities, as well as consulting and domain expertise.

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