JP Morgan Gives Update On ExlService Holdings Following Recent Earnings Release

ExlService Holdings EXLS 1Q11 results were ahead of JP Morgan's and consensus expectations, driven by strong revenue and higher margins. The company also announced a relatively large acquisition, which JPM believes will be investors' focus on the call. While bears could point to a large acquisition in a relatively slower growth BPO industry and integration risks, JP Morgan believes the acquisition enhances EXLS' capabilities in a key BPO service, F&A. Moreover, investors should also cheer the acquisition's projected GAAP accretion, and JPM estimates a material increase in CY11 adjusted estimates after the call. The company's CY11 guidance was essentially maintained ex. acquisition. JPM maintains its Overweight rating on EXLS given its higher growth. 1Q adj. margins came in at 14.3% vs. JPMe of 13.8%. G&A expenses, as a % of revenue, came in much lower than JPM's estimate but were almost completely offset by higher sales and marketing expenses of 8%. EXLS closed Monday at $20.42