Capgemini Earnings: Soft Business Conditions Continue, but Improvement Expected in Future

Narrow-moat Capgemini reported fiscal 2023 sales of EUR 22.5 billion, up 4.4% versus last year at constant exchange rates and an operating margin of 13.3%, a 30-basis-point increase. Results were broadly in line with FactSet consensus, but slightly lower than our forecast. Guidance for fiscal 2024 is modest, reflecting continued soft business conditions. Nevertheless, shares were up around 3%-4% intraday. We surmise the market is reacting to Capgemini guiding for the trough in growth to be in the first quarter. We don’t expect to make a material change to our EUR 210 fair value estimate. At current levels, the shares look undervalued.