Stifel maintains industry view despite IT service concerns

On Monday, Stifel analysts maintained their outlook on the Information and Financial Technology Services sector, despite recent negative reports on revenue growth expectations. David M. Grossman from Stifel highlighted that although the last three IT service vendors reporting in March indicated revenue growth below consensus for Calendar Year 2025 or Fiscal Year 2026 ending in March, the firm’s industry view remains steady.

Stifel’s assessment of the March reporting cycle revealed mixed guidance from the 14 companies monitored. Three companies, Accenture (NYSE:ACN), EPAM Systems (NYSE:EPAM), and WNS Holdings (NYSE:WNS), raised their guidance, while four companies, including EXLService Holdings (NASDAQ:EXLS), IBM (NYSE:IBM), CapGemini (EPA:CAP), and Cognizant Technology Solutions (NASDAQ:CTSH), kept their guidance unchanged. According to InvestingPro data, WNS currently trades at an attractive P/E ratio of 15.08 and shows strong financial health with a current ratio of 1.76, suggesting solid operational efficiency. However, seven companies reported a decline in guidance, with three Tier 1 Indian offshore vendors among them, alongside a Business Process Outsourcing (BPO) provider with an unfavorable industry and geographic mix, and the three mid-sized firms that reported last week.

Despite these mixed results, Stifel’s near-term perspective on the sector has not shifted. The analysts believe that EPAM Systems stands out as a company well-positioned to capitalize on secular technology trends, being a beneficiary of artificial intelligence and a consistent double-digit grower, currently trading at a low multiple on depressed earnings. Accenture, regarded as the industry’s bellwether, is expected to provide the next significant data point with its May quarter report, with further insights anticipated closer to the reporting date. Finally, EXLService Holdings is noted as the most defensive name within the group. InvestingPro analysis indicates WNS appears undervalued based on its Fair Value metrics, with analysts setting price targets suggesting potential upside. For deeper insights into WNS and other IT services companies, including comprehensive financial health scores and exclusive ProTips, explore the full range of analysis tools available on InvestingPro.

In other recent news, WNS Holdings has reported a 17% year-on-year increase in net profit, amounting to $48.6 million for its fiscal third quarter. Additionally, WNS is expected to announce its full-year earnings later this month. In a significant development, Capgemini SE is reportedly in advanced negotiations to acquire WNS Holdings. The talks are ongoing, and although an agreement has not yet been reached, Capgemini has emerged as the most likely buyer. The potential acquisition has attracted attention, with Baird analyst David Koning suggesting that WNS could be valued between $75 to $84 per share if sold.

Furthermore, WNS Holdings has extended the term of Non-Executive Director Françoise Gri for an additional year, pending re-election at the company’s next annual general meeting. This decision reflects the company’s appreciation of her contributions to the board. In another strategic move, WNS has extended its partnership with Delaware North to enhance finance operations through digital innovation, using its AI-enabled platform, APTrac. This collaboration aims to improve process efficiency, reduce costs, and enhance compliance for Delaware North. These recent developments highlight WNS Holdings’ active engagement in strategic partnerships and potential acquisition discussions.

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