Needham & Company Lifts Numbers on Virtusa (VRTU) on Q3 'Beat and Raise'

November 2, 2012 11:25 AM EDT Send to a Friend
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Price: $38.40 +3.50%

Rating Summary:
    7 Buy, 0 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 24 | Down: 25 | New: 17
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Needham & Company reiterated its Buy rating and raised its price target on Virtusa (NASDAQ: VRTU) from $19 to $23 following strong Q2 results and raised FY13 guidance.

The analyst coments: "VRTU delivered strong results for 2Q FY13 and raised guidance for FY13. Revenue and margins topped expectations, while EPS matched estimates. We were especially encouraged by VRTU's strong 6% Q/Q revenue growth performance in 2Q, particularly the 9% Q/Q growth in the BFSI segment. For FY13, management upped the mid-point of the revenue growth guidance range to 19% Y/Y from 17% Y/Y, while leaving the mid-point of the margin (160 bps increase) and EPS (35% Y/Y growth) guidance range unchanged. Based on VRTU's strong deal pipeline with more large, transformational, multi-year projects
($5+ million deals) and potential to leverage G&A expenses and drive sustainable operating margin expansion (100-200 bps per year), we believe there is
upside potential to our 2H FY13 and FY14 estimates. With the stock trading at just 10x ex-cash our FY14 EPS estimate of $1.35 for 30% LT EPS growth, we
believe the risk-reward remains compelling and reiterate our BUY rating."

The firm raised FY13 revenue estimate to $331 million (19% Y/Y growth) from $325 million (17% Y/Y), while EPS estimate remains unchanged at $1.09. For FY14, they continue to conservatively model $373 million in revenue and $1.35 in EPS.

For an analyst ratings summary and ratings history on Virtusa click here. For more ratings news on Virtusa click here.

Shares of Virtusa are up 1.6 percent to $17.57.


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