French IT and consulting company Capgemini (FR:CAP) predicts its annual revenue (on constant currency) to decline by 0.5%-1.5%, as compared to the earlier predicted growth of 0-3%. The company attributed this decline to an expected slowdown in the automotive and aerospace sectors and a slower-than-expected recovery in financial services in the second half. Capgemini shares fell by 7.6% as of writing.
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Headquartered in France, Capgemini is a multinational company that offers IT (information technology) and consulting services to companies across multiple industries.
Capgemini’s Weak Revenue Growth
In its first-half results for 2024, Capgemini reported a 2.5% year-over-year decline in its revenues of €11.14 billion on a reported basis. Regionally, the company reported a 5.4% year-over-year decline in its North American revenue on constant exchange rates. North America is the company’s second biggest market, contributing 28% to the total revenue in the first half of 2024.
Meanwhile, revenues in the UK and Ireland dropped by 2.8%, while Asia-Pacific and Latin America declined by 1.6% year-over-year.
Among its segments, Applications & Technology Services, which represent 62% of the company’s total revenues, saw a decline of 3.4%.
Bookings Failed to Impress
During the first half, Capgemini’s bookings reached €11.8 billion, marking a 1.7% decrease at constant exchange rates. This resulted in a book-to-bill ratio of 1.06 for the period. In the second quarter, bookings were stable year-over-year at constant rates. Analysts from Jefferies highlighted the lower bookings as a concern area for the company.
Meanwhile, Citi analysts noted that the company faces challenges from a slowing global economy and increased competition for cost-cutting projects. They also highlighted the necessity to adapt to emerging technologies.
In terms of outlook, the company maintained its targets for operating margin and free cash flow for 2024. In the first half, organic free cash flow generation reached €163 million, significantly up from negative €53 million in the same period last year.
Is Capgemini a Good Stock to Buy?
According to TipRanks’ consensus, CAP stock has received a Moderate Buy rating based on seven Buy and three Hold recommendations from analysts. The Capgemini share price target is €234.20, which is 32.3% higher than the current price level.
