Syntel Inc. (SYNT) recently posted second-quarter earnings of 61 cents per share, eclipsing the previous year’s 42 cents and exceeding the Zacks Consensus Estimate by 20%. Revenue slipped 3% year-over-year.

Company Description

Syntel Inc. provides information technology and knowledge process outsourcing services worldwide. In describing its business, the company explains that it delivers flexible, custom Information Technology and Business Process outsourcing solutions that improve quality and reduce costs. Syntel serves the financial services, healthcare, insurance, automotive and retail industries among others.

Robust Results

The company recently posted second-quarter earnings of 61 cents per share, eclipsing the previous year’s 42 cents and exceeding the Zacks Consensus Estimate by 20%. Revenue slipped 3% year-over-year.

Management said it was encouraged by improved stabilization in the marketplace and the increasingly positive discussions initiated with clients during the quarter, adding that while discretionary projects remain sidelined, customers are beginning to once again look at cost reduction initiatives which are aligned with their longer-term strategic objectives.

The company noted that the timing of new project starts and changes in the marketplace are uncertain going forward. Syntel believes that the second quarter revenue run-rate represents a minimum level for the balance of 2009. The company plans to continue focusing on driving key investment initiatives and proactive cost management in the second half of the year with the objective of properly positioning the company for long-term sustainable growth.

Syntel has fared well against the broader market, beating it by about 40% over the past year.

Higher Forecasts

Syntel updated its earnings guidance, calling for a range of $2.40 to $2.50 per share.
The full-year Zacks Consensus Estimate climbed from $2.20 to $2.41 per share over the past month. For 2010, the Zacks Consensus Estimate stands at $2.39, versus last month’s $2.11.

Strong Industry Comparisons

The technology services player has a return on equity (ROE) of 40%, more than doubling the industry-average of 14%. The company boasts a solid balance sheet, showing no debt. Its net profit margin of 25% is well above the industry average of 5%. Syntel’s dividend yield of 1% is above the industry average and translates into an annual dividend of 24 cents per share.

Zacks Investment Research
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