ExlService Lifts 2020 Profit Outlook As Business Rebounds

ExlService Holdings raised its earnings and revenue guidance for 2020, citing greater confidence in its performance over the remaining year and a rebound in the business. The operations management and analytics company also reported preliminary 3Q numbers.

ExlService (EXLS) expects 2020 revenues to be in the range of $945 million to $955 million versus prior guidance of $922 million to $938 million. The company now projects adjusted earnings in the range of $3.35 to $3.45, compared to its previous forecast of $2.60 to $2.80 announced on Aug. 6. In addition, the company expects 3Q revenue to generate at least $239 million and adjusted earnings of at least $1 per share.

ExlService’s CEO Rohit Kapoor said, “While there continues to be considerable uncertainty in the market as a result of the COVID-19 pandemic, EXL’s business over the past few months has rebounded better than initially expected. As a result, we have greater confidence in expected performance for the remainder of the year.” He added that “The demand for our services in Analytics has grown very well as our clients’ need for data analytics has accelerated. We are also seeing faster decision making in operations management, including new logos and expansions with current clients.”

Furthermore, the company said it plans to repurchase up to $80 million in shares as part of its $200 million share repurchase program in 2020. Previously, it had planned to buy back $40 million worth of shares. (See EXLS stock analysis on TipRanks).

On Aug. 17, JPMorgan analyst Tien Tsin Huang maintained a Hold rating on the stock but raised the price target on ExlService to $77 (24.7% upside potential) from $66, establishing 2021 price targets in the Payments, Processors and IT Services space. He said that the IT and BPO (Business Process Outsourcing) services stocks have underperformed the broader market on a year-to-date basis, despite lower earnings cut on average. However, in the second half of 2020, he expects “some level of mean reversion” and sees the sector outperforming “assuming macro continues to recover.”

Like Huang, the Street is sidelined the stock with a Hold analyst consensus. The average price target of $70.60 implies upside potential of about 14.4% to current levels. Shares are down about 11.1% year-to-date.

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