iGATE Shares Jumped: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of IT outsourcing company iGATE (NAS: IGTE) were in rally mode today, gaining as much as 10% in intraday trading after reporting fourth-quarter results.
So what: What do investors want at this time of year? They want to see their companies topping Wall Street's expectations. Or, at least, that's what almost always gets companies' shares moving like the electric boogaloo.
For the final quarter of the year, iGATE did exactly that -- beat expectations -- at least on the bottom line. Sales for the fourth quarter skyrocketed to $267.7 million from $81 million last year, while non-GAAP earnings per share slipped from $0.34 in 2010 to $0.27. Analysts had expected the company to report $0.26 in per-share profit on $268.8 million in revenue.
Now what: While it's good news that iGATE managed to inch above Wall Street's earnings estimates, it should be little surprise that the business grew as much as it did versus last year since the company took the major plunge of buying Patni Computer Systems (NYS: PTI) . The big question still remains whether that risky move will pay off for investors over the long run. The combined company is certainly larger, but it's also saddled with a significant amount of debt and shareholders are seeing a big chunk of the bottom line go to dividends on preferred stock.
This was a positive quarter, but there are still some very real question marks for iGATE's results to answer in the coming quarters and years.
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