Capgemini Cuts Revenue Guidance on Auto, Aerospace Weakness — Update

By Adam Whittaker

Capgemini cut its full-year revenue guidance, citing a deterioration in the automotive and aerospace sector, after demand weakness weighed on its top line in the first half.

The French consulting and technology group said Friday that there are signs of improvement across most businesses, sectors and regions, particularly in North America. However, a weaker outlook in the automotive and aerospace sectors and a slower recovery in financial services led Capgemini to cut its top-line expectations for the year.

Capgemini's shares fell around 10% in early morning trading to EUR174.40, erasing year-to-date gains and taking the stock down 7.8% since the year started.

Investors were turning more positive on Capgemini in the run-up to its half-year reports, but the results and full-year guidance fell short of expectations, Jefferies analyst Charles Brennan wrote in a note to clients.

For the full year, Capgemini forecasts revenue to fall by between 0.5% and 1.5% at constant currency, which compares with expectations of growth of up to 3% previously.

Capgemini's update sends a negative signal on demand for IT services, which could offer clues on trends for peers such as Accenture, International Business Machines, Cognizant, Tata Consultancy Services and Infosys, JPMorgan analysts said.

IBM on Wednesday reported quarterly results that beat analyst expectations, while Accenture in June reported earnings and sales slightly below expectations and forecast growing bookings and demand for generative artificial intelligence products.

Capgemini's net profit for the half year rose to 835 million euros ($905.6 million) from EUR809 million for the same period last year.

Revenue fell 2.5% to EUR11.14 billion from EUR11.43 billion, which compares with analysts' forecasts of EUR11.17 billion according to a Visible Alpha consensus.

Operating margin as a percentage of revenue--a key company metric--remained unchanged at 12.4% and organic free cash flow rose to EUR163 million from an outflow of EUR53 million.

Guidance for an operating margin of 13.3% to 13.6%, and an organic free cash flow of around EUR1.9 billion remain unchanged.

Write to Adam Whittaker at adam.whittaker@wsj.com

(END) Dow Jones Newswires

July 26, 2024 05:00 ET (09:00 GMT)

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