Volume Reductions Weigh Genpact's Recent Quarters Amid Economic Uncertainty, Analyst Lowers Estimates

Needham analyst Mayank Tandon reiterated the Buy rating on Genpact Limited G, lowering the price target to $50 from $56.

The company recently reported Q2 results, recording total revenue of $1.106 billion, up 2% Y/Y, missing the street view. 

Tandon highlights the pockets of weakness within G's ST project work which has caused the softer-than-expected revenue.

Coming off the mixed Q2 results, management lowered the FY23 outlook on revenue and EPS.

Considering the dismal outlook, the analyst lowered the FY23 revenue outlook from $4.681 billion to $4.610 billion.

For FY24, the analyst reduced the revenue estimate from $5.037 billion to $4.993 billion.

While Genpact's business has been pressured in recent quarters due to the ongoing economic uncertainty, which is causing volume reductions and reduced ST project spend, Tandon believes the demand for core BPO/analytics services remains strong.

The analyst thinks Genpact remains well positioned to drive improved growth NT given the company's steady pace of significant new logo wins above historical levels in 2023.

Overall, the analyst thinks that Genpact allows investors to play offense and defense with the company's focus on helping Global 2000 firms streamline operations, reduce costs, and leverage analytics.

In fact, Tandon expects the strong booking momentum to help Genpact continue to deliver solid low-double-digit revenue growth while expanding margins and returning capital to shareholders through buybacks and dividends. 

Price Action: G shares are trading lower by 0.45% to $37.23 on the last check Friday.