On Tuesday, Genpact Ltd . (NYSE:G) saw its stock price target increased to $45.00, up from $40.00, by Mizuho (NYSE:MFG), while the firm kept a Neutral stance on the stock. The upgrade follows Genpact's robust third-quarter performance for fiscal year 2024, where the company also improved its full-year revenue growth and adjusted earnings per share (EPS) forecasts.
The improved outlook is largely attributed to better-than-expected growth in Data-Tech-AI revenue, propelled by effective execution of the company's "3+1" strategy. This includes the expansion of technological partnerships and a focus on GenAI, Genpact's artificial intelligence platform.
Despite the positive developments, concerns remain about Genpact's significant exposure to the traditional business process outsourcing (BPO) sector, which may pose challenges in the medium term.
Moreover, the updated guidance for Digital Operations constant currency (CC) growth suggests a potential slowdown in the fourth quarter of 2024. This deceleration could extend into 2025, as the company may face difficult comparisons from the previous year and possible pressures on GenAI.
In light of these factors, Mizuho has revised its revenue and adjusted EPS estimates for 2024 and 2025 upwards, leading to the new price target. This adjustment reflects a more optimistic view of Genpact's financial performance, taking into account the recent upward revisions to the company's guidance.
Genpact's third-quarter success and subsequent forecast adjustments mark a significant moment for the company, indicating a strong performance in its specialized Data-Tech-AI segment.
However, the caution expressed by Mizuho highlights the balance between Genpact's innovative strides in technology and the ongoing reliance on its traditional BPO services. The market will be watching closely to see how these dynamics play out in the company's financials in the coming quarters.
In other recent news, Genpact Limited reported a strong Q3 performance, with revenues reaching $1.21 billion, a 7% increase from the previous year. This growth was driven by a 9% rise in Data-Tech-AI and a 5% increase in Digital Operations. The company also adjusted its operating income margin to 17.6% and improved its gross margin to 35.6%.
In light of these developments, Genpact has raised its full-year revenue and EPS guidance. The new revenue forecast stands at approximately $4.740 billion to $4.751 billion, while the adjusted EPS has been increased to $3.24. The company also returned $250 million to shareholders through buybacks and dividends in the first nine months of the year.
In addition, Genpact reported a 43% booking growth for the quarter, with 21 new logos and three large deals over $50 million. The company also expects a 6% revenue growth for 2024, up from the initial forecast of 4.5%. Despite a slight decrease in sole-sourced deals from 45% to 42%, Genpact remains optimistic about its strategic direction and market positioning.
InvestingPro Insights
Genpact's recent performance and Mizuho's price target increase are further supported by several key financial metrics and insights from InvestingPro. The company's P/E ratio of 12.63 and adjusted P/E ratio of 12.49 for the last twelve months as of Q3 2024 suggest that Genpact is trading at a relatively low earnings multiple, which aligns with InvestingPro's tip that the company is "Trading at a low P/E ratio relative to near-term earnings growth."
Moreover, Genpact's revenue growth of 5.22% over the last twelve months and 6.62% in Q3 2024 demonstrates the company's ability to expand its business, particularly in the Data-Tech-AI segment as mentioned in the article. This growth is complemented by a strong operating income margin of 14.31%, indicating efficient management of operational costs.
InvestingPro Tips also highlight that Genpact has raised its dividend for 8 consecutive years and maintains a dividend yield of 1.31%. This consistent dividend growth, coupled with a 10.91% increase in the last twelve months, underscores the company's financial stability and commitment to shareholder returns.
For investors seeking more comprehensive analysis, InvestingPro offers 16 additional tips for Genpact, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.