Sell: ExlService Holdings (EXLS)
From The Periscope Report
Updated from Investment Digest 761, September 17, 2014
ExlService Holdings (EXLS) provides outsourcing and transformation services, mainly to insurance companies and financial institutions.
We said EXLS would beat the $0.59 per share estimate for this quarter (on a Non-GAAP basis) and the stock would rise on the news. We were right about earnings. Revenue rose 5% YoY to $171 million, which missed estimates by $6 million. Net earnings increased 5% to $0.61 per share, which beat estimates by two cents.
In the conference call, management lowered its revenue guidance for the full year 2016 for the 2nd quarter in a row. Revenues are now expected in the range of $680 - $688 million, down from prior guidance of $691 - $703 million. Management narrowed its earnings guidance to $2.30 - $2.35 per share, compared to prior guidance of $2.25 - $2.35 per share. The lowered guidance reflects the impact of lower discretionary spending in the consulting business and lower revenue in the platform business due to softness in these markets, which has been partially offset by projected revenue from recent acquisitions. The stock lost 7% after the call.
We are concerned about the outlook for 2017 considering dour comments made on the conference call, so we are lowering EXLS to a SELL.
Tom Byrne, The Periscope Report, 4025 Sunset Ridge Drive, Canyon Ferry Crossing, Helena, MT 59602, 406-465-4663, October 2016