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Kyndryl Holdings Incorporation (KD)
NYSE:KD
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Kyndryl Holdings Incorporation
(NYSE:KD)
48Neutral
Positive Factors
Competitive Advantage
Kyndryl's vendor-agnostic position is an advantage, as the company is insulated from services competition from cloud vendors.
Earnings
Analyst maintains a Buy rating based on KD’s execution turnaround story.
Revenue Growth
Company signings have increased meaningfully over the past few quarters, and signings are viewed as a leading indicator.
Negative Factors
Audit Concerns
The report alleges aggressive accounting, coinciding with potential incremental IBM-related costs, suspect signings metrics, audit concerns, and internal stock sales.
Audit Matters
The optics of the audit matters aren’t ideal, but KD says auditor PwC OK’d the financial statements despite the systems issue.
Internal Controls
The report also alleges weakness in internal controls and key audit matters.
Kyndryl Holdings Incorporation (KD) vs. S&P 500 (SPY)
Market Cap
$6.95B
Dividend YieldN/A
Average Volume (3M)2.81M
Price to Earnings (P/E)54.2
Beta (1Y)1.46
Revenue Growth-8.20%
EPS GrowthN/A
CountryUS
Employees80,000
SectorTechnology
Sector Strength51
IndustryInformation Technology Services
Share Statistics
EPS (TTM)0.56
Shares Outstanding232,694,500
10 Day Avg. Volume2,552,183
30 Day Avg. Volume2,809,384
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.53
Price to Cash Flow (P/CF)7.70
P/FCF Ratio7.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$44.60Price Target Upside47.24% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering5
Kyndryl Holdings Incorporation Business Overview & Revenue Model
Company DescriptionKyndryl Holdings, Inc. operates as a technology services company and IT infrastructure services provider worldwide. The company offers cloud services; core enterprise and cloud services; application, data, and artificial intelligence services; digital workplace services; security and resiliency services; and network services and edge services. It serves financial, telecommunications, retail, automobile, and transportation industries. The company was incorporated in 2020 and is headquartered in New York, New York.
How the Company Makes MoneyKyndryl makes money primarily through its range of IT infrastructure services, which it provides to a diverse clientele across various industries. The company's revenue model is based on long-term service contracts with enterprises that require ongoing IT management, cloud services, and digital transformation support. Key revenue streams include fees for managed services, cloud infrastructure management, and digital workplace solutions. Kyndryl's earnings are significantly enhanced by strategic partnerships with major technology providers like Microsoft, Google, and Amazon, which enable it to offer integrated cloud and IT solutions. Additionally, the company benefits from its legacy customer base inherited from IBM, which includes numerous Fortune 500 companies, ensuring a stable and recurring revenue flow.
Kyndryl Holdings Incorporation Financial Statement Overview
Summary
Kyndryl Holdings is experiencing declining revenue and profitability issues across financial statements. The income statement shows decreasing revenue with some margin recovery. The balance sheet reflects high leverage and limited equity, posing financial risks. Cash flow statements indicate struggles in generating positive cash flow. Strategic improvements are needed for stability and growth.Income Statement
Kyndryl Holdings has been experiencing declining revenue over recent years. The TTM (Trailing-Twelve-Months) shows a slight recovery in margins, with a gross profit margin of approximately 39.8% and a net profit margin of 0.9%. However, the company has struggled with consistent profitability, evidenced by previous years' losses. The EBIT and EBITDA margins have shown some improvement, but overall revenue growth has been negative.45
Neutral
Balance Sheet
The balance sheet indicates a high debt-to-equity ratio in the TTM (Trailing-Twelve-Months) of approximately 3.61, reflecting significant leverage. The return on equity is modest at 12.6%, suggesting limited profitability on shareholders' equity. The equity ratio is low, highlighting potential financial instability. Overall, the balance sheet reflects a high-risk financial structure with limited equity support.38
Negative
Cash Flow
Cash flow analysis reveals challenges with free cash flow, which has been negative and inconsistent. The operating cash flow to net income ratio is approximately 3.67 in the TTM (Trailing-Twelve-Months), indicating reliance on operational cash rather than profitability. The free cash flow to net income ratio is negative, underscoring ongoing struggles to generate cash from operations.42
Neutral
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Dec 2021 | Dec 2020 | Dec 2019 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 15.11B | 16.05B | 17.03B | 18.66B | 19.35B | 20.28B | Gross Profit |
| 3.03B | 2.86B | 2.53B | 2.11B | 2.21B | 2.60B | EBIT |
| 318.00M | 116.00M | -422.00M | -704.00M | -1.70B | -503.00M | EBITDA |
| 1.43B | 1.14B | 952.00M | 960.00M | 195.00M | 1.42B | Net Income Common Stockholders |
| 138.00M | -340.00M | -1.37B | -2.31B | -2.01B | -943.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 1.50B | 1.55B | 1.85B | 2.22B | 24.00M | 36.00M | Total Assets |
| 9.93B | 10.59B | 11.46B | 13.21B | 11.21B | 11.74B | Total Debt |
| 3.95B | 4.14B | 4.24B | 4.60B | 1.39B | 1.36B | Net Debt |
| 2.45B | 2.59B | 2.40B | 2.38B | 1.37B | 1.32B | Total Liabilities |
| 8.72B | 9.47B | 10.00B | 10.45B | 6.28B | 5.80B | Stockholders Equity |
| 1.09B | 1.01B | 1.36B | 2.77B | 4.87B | 5.89B |
| Cash Flow | Free Cash Flow | ||||
| -61.00M | -197.00M | -84.00M | -871.00M | -408.00M | -56.00M | Operating Cash Flow |
| 506.00M | 454.00M | 781.00M | -119.00M | 628.00M | 1.13B | Investing Cash Flow |
| -402.00M | -553.00M | -835.00M | -572.00M | -953.00M | -1.13B | Financing Cash Flow |
| -219.00M | -170.00M | -141.00M | 2.92B | 312.00M | -1.00M |
Kyndryl Holdings Incorporation Technical Analysis
Negative
30.29
Price Trends
35.63
Negative
35.71
Negative
30.15
Positive
Market Momentum
-1.68
Negative
42.52
Neutral
56.19
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KD, the sentiment is Negative. The current price of 30.29 is below the 20-day moving average (MA) of 31.72, below the 50-day MA of 35.63, and above the 200-day MA of 30.15, indicating a neutral trend. The MACD of -1.68 indicates Negative momentum. The RSI at 42.52 is Neutral, neither overbought nor oversold. The STOCH value of 56.19 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for KD.
Kyndryl Holdings Incorporation Risk Analysis
Kyndryl Holdings Incorporation disclosed 30 risk factors in its most recent earnings report. Kyndryl Holdings Incorporation reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Kyndryl Holdings Incorporation Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $9.51B | 19.57 | 13.79% | ― | 14.04% | 29.08% | |
80 Outperform | $8.40B | 16.86 | 22.15% | 1.31% | 6.46% | -16.94% | |
78 Outperform | $5.56B | 16.25 | 21.53% | 1.26% | 0.47% | -18.98% | |
72 Outperform | $3.13B | 22.53 | 16.64% | ― | 1.07% | -13.39% | |
58 Neutral | $11.04B | 9.83 | -6.56% | 3.16% | 7.59% | -10.43% | |
48 Neutral | $6.95B | 54.22 | 12.09% | ― | -8.20% | ― | |
47 Neutral | $2.66B | 267.98 | -2.46% | ― | -5.65% | 78.20% |
* Technology Sector Average
Performance Comparison
KD
Kyndryl Holdings Incorporation
30.29
10.59
53.76%
CACI
Caci International
417.22
54.71
15.09%
G
Genpact
47.94
17.84
59.27%
SAIC
Science Applications
117.18
-5.97
-4.85%
WNS
WNS
67.30
21.32
46.37%
DXC
DXC Technology
14.82
-4.97
-25.11%
Kyndryl Holdings Incorporation Earnings Call Summary
Earnings Call Date: Feb 3, 2025 | % Change Since: -20.21% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Positive
The earnings call presented a strong quarter of financial performance with significant growth in signings and revenue, particularly in the Kyndryl Consult segment. However, there were some challenges such as the revenue decline in constant currency and the impact of currency movements on reported revenue. The company also continues to face headwinds from IBM software costs. Overall, the highlights significantly outweigh the lowlights, showing positive momentum and a strong outlook.Highlights
Record Signings and Revenue Growth
Signings grew year-over-year for the fifth consecutive quarter, up 31% to $16.3 billion over the last 12 months. Kyndryl Consult revenues were up 18%, and signings were up 45%, reaching a $3 billion revenue stream.
Strong Financial Performance
Adjusted pretax margins increased substantially, and adjusted free cash flow exceeded $170 million. Adjusted EBITDA margin reached a record 18.8%, up 320 basis points year-over-year.
Increased Fiscal 2025 Earnings Outlook
Fiscal 2025 adjusted EBITDA margin outlook increased to at least 16.7%, and adjusted pretax income outlook increased to at least $475 million.
Growth in Hyperscaler Related Revenue
Hyperscaler related revenue surpassed $300 million in the quarter, tracking ahead of the nearly $1 billion full year target.
Successful Execution of 3A's Initiatives
The 3A's initiatives (alliances, accounts, advanced delivery) continue to drive incremental signings, revenue, and earnings.
Lowlights
Revenue Decline in Constant Currency
Revenue totaled $3.7 billion, which is a 3% decline in constant currency.
Forex Impact on Reported Revenue
Reported revenues were affected by currency movements, creating a 2-point gap between reported revenue change and constant currency revenue change.
Continued IBM Software Cost Headwinds
Included in adjusted pretax income was a contractually committed $50 million year-over-year increase in IBM software costs.
Company Guidance
During Kyndryl's third quarter 2025 earnings call, the company reported robust financial metrics, highlighting a 31% year-over-year increase in signings, amounting to $16.3 billion over the last 12 months, and delivering more than $170 million in adjusted free cash flow for the quarter. The company's adjusted pretax margins saw substantial growth, with a significant contribution from Kyndryl Consult, which achieved an 18% revenue increase and a 45% rise in signings over the past year. Hyperscaler-related revenues exceeded $300 million, positioning Kyndryl on track to surpass its $1 billion full-year target. The strategic focus on the 3A’s initiatives—alliances, accounts, and advanced delivery—continued to bolster incremental signings, revenue, and earnings, with projected pretax margins from new signings in the high single digits. Kyndryl also initiated a stock buyback under its share repurchase authorization. Looking forward, the company aims to triple its adjusted free cash flow by fiscal 2028, more than double its adjusted pretax income, and achieve mid-single-digit annual revenue growth, underscoring their commitment to sustained profitable growth.Kyndryl Holdings Incorporation Corporate Events
Stock BuybackBusiness Operations and Strategy
Kyndryl Holdings Announces $300 Million Share Buyback
Positive
Nov 21, 2024
Kyndryl Holdings, Inc. has announced a $300 million share repurchase program, signaling confidence in their business growth and financial stability. The company plans to buy back shares through various market transactions, with the flexibility to modify or discontinue the program as needed. This move aligns with Kyndryl’s strategy to return capital to shareholders while maintaining financial agility.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.