WNS Up on Q3 Earnings Beat & Buyback Nod; Tightens View - Analyst Blog

Shares of WNS (Holdings) Ltd. ( WNS ) closed at $22.55 in the last trading session, gaining 12.02% on solid fiscal third-quarter 2015 earnings and a new share repurchase authorization.

Operating net earnings came in at 42 cents per share for the quarter ended Dec 31, 2014. The bottom line surpassed the Zacks Consensus Estimate by 23.5% and improved year over year by the same margin.

Including one-time charges, net income came in at 31 cents per share, improving 35% year over year.

WNS posted strong revenue growth and witnessed operating and net income margin expansion.

Operational Updates

WNS' total revenue came in at $128.4 million in the quarter under review, increasing 7.3% year over year. The upside was driven by better service offering, new client revenues and extension of existing relationships. Revenues were almost in line with the Zacks Consensus Estimate.

During the quarter, the company added five new clients, expanded four existing relationships and renewed 17 contracts. WNS also closed two new large deals, taking the year-to-date tally to five.

Cost of revenue increased 4.2% year over year to $85.1 million, due to a 44% rise in general and administrative expense. But a decline in selling & marketing expenses came as a respite.

WNS' operating margin was 21.8% in the reported quarter, up 390 basis points (bps) year over year. Favorable exchange rate and hedging, improved productivity, gain sharing, and operating leverage associated with higher revenue aided the expansion.

Financial Updates

WNS (Holdings) exited the quarter with cash and investments of $154 million, up 31% from the fiscal 2014-end level. The company generated $28.1 million in cash from operations and reported $5.3 million in capital expenditure.

During the quarter, WNS lowered debt by $24.4 million.

Share Repurchase Program

The board of directors of WNS approved a new share repurchase program, authorizing the company to buy back 1.1 shares in 12 months starting Apr 1, 2015. Internal cash accruals will be deployed to fund the buyback.

Fiscal 2015 Guidance

WNS (Holdings) tightened its guidance. It expects to generate revenues between $502 million and $506 million instead of $500 million to $516 million projected previously. This would translate into net revenue increase of 6.7% to 7.1%.

Operating net income is projected between $90 million and $92 million or $1.69 and $1.73 per share.

Capital expenditure is estimated between $23 million to $26 million, down from $25 million to $30 million expected earlier.

Zacks Rank

WNS presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the business service industry include Healthcare Services Group Inc. ( HCSG ), comScore Inc. ( SCOR ) and ExamWorks Group, Inc. ( EXAM ). All these stocks carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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