The recommendations of Wall Street analysts are often relied on by investors when deciding whether to buy, sell, or hold a stock. Media reports about these brokerage-firm-employed (or sell-side) analysts changing their ratings often affect a stock's price. Do they really matter, though? Let's take a look at what these Wall Street heavyweights have to say about Kyndryl Holdings, Inc. (KD) before we discuss the reliability of brokerage recommendations and how to use them to your advantage. Kyndryl Holdings, I ...

Respondents also report up to 225% return on investment on their mainframe transformation initiatives in one year Mainframes continue to play a critical role in hybrid IT environments NEW YORK, Sept. 10, 2024 /PRNewswire/ -- Kyndryl (NYSE: KD), the world's largest IT infrastructure services provider, today released the results of its second annual State of Mainframe Modernization Survey, declaring that 2024 is the year of AI adoption on the mainframe. The survey also reaffirmed that while modernization proj ...

Revenue and Financial Performance - Revenue for the three months ended June 30, 2024 was $3.7 billion, a decline of 11% compared to the prior-year period[103] - Revenue for the three months ended June 30, 2024 was $3.739 billion, a decrease of 11% compared to $4.193 billion in the same period in 2023[114] - United States revenue decreased 15% to $986 million, driven by efforts to reduce low-margin revenues[108] - Japan revenue decreased 7% to $569 million, with a 6% increase in constant currency[110] - Principal Markets revenue decreased 5% to $1.3 billion, but adjusted EBITDA increased 60% to $241 million[111] - Strategic Markets revenue decreased 15% to $869 million, with adjusted EBITDA declining 20% to $120 million[112] Net Income and Adjusted EBITDA - Net income improved to $11 million, a $152 million increase from the prior-year period[103] - Adjusted EBITDA for the three months ended June 30, 2024 was $556 million, a decline of 9% compared to the prior-year period[106] - Corporate and other had an adjusted EBITDA loss of $21 million, compared to a loss of $24 million in the prior-year period[113] Cost Management and Efficiency - Cost of services decreased to 78.5% of revenue in Q2 2024 from 82.3% in Q2 2023, driven by lower depreciation expenses and increased operating efficiencies[114] - Workforce rebalancing charges were $36 million in Q2 2024, a decrease of 38% from $58 million in Q2 2023[114][116] - The company expects workforce rebalancing and site-rationalization activities to reduce costs by over $200 million in fiscal year 2026[117] Cash Flow and Financial Position - Net cash used in operating activities improved to $48 million in Q2 2024 from $173 million in Q2 2023, driven by increased net income and better receivables collection[124] - Total assets decreased by $427 million to $10.2 billion as of June 30, 2024, primarily due to a $284 million decrease in cash and cash equivalents[121] - Gross proceeds from receivables sold to third parties were $0.8 billion in Q2 2024, down from $1.2 billion in Q2 2023[134] Debt and Financing - The company completed a $500 million senior unsecured notes offering in February 2024 with a 6.35% interest rate due 2034[130] - The revolving credit facility of $3.15 billion remains undrawn as of June 30, 2024, with the agreement expiring in October 2026[131] - The company initiated a supplier financing program with a third-party financial institution, offering suppliers early payment at a discounted amount, with average invoice terms of 90 to 120 days[135] - The company's obligations under the supplier financing program are recognized as accounts payable, with immaterial outstanding obligations as of June 30, 2024, and March 31, 2024[135] Risks and Challenges - Forward-looking statements in the report include risks such as failure to attract or retain customers, competition, and impacts from economic, political, and public health conditions[137] - Risks related to cybersecurity, data governance, and privacy are highlighted as potential challenges for the company[137] - The company faces risks from currency fluctuations, pension plans, and changes in market liquidity conditions[138] - Legal proceedings, tax matters, and environmental issues are identified as additional risks[138] - The company's ability to manage acquisitions and dispositions, including integration challenges and higher debt levels, is a noted risk[137] - Risks related to the company's spin-off from IBM and deficiencies in information technology controls are mentioned[138] Accounting and Reporting - No changes were made to the company's critical accounting policies and estimates as described in the Annual Report on Form 10-K for the fiscal year ended March 31, 2024[136] - The company routinely posts material information on its corporate and Investor Relations websites, which is not incorporated into SEC filings[140] Business Development and Signings - Total signings increased by 11% to $3.1 billion in Q2 2024 compared to $2.8 billion in Q2 2023[127]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 totaled $3.7 billion, reflecting an 8% decline in constant currency, primarily due to the intentional exit from low-margin revenue streams [20][21] - Adjusted EBITDA was $556 million, with an adjusted EBITDA margin of 14.9%, an increase of 30 basis points year-over-year [22] - Adjusted pretax income grew 96% to $92 million, indicating strong operational execution [22][24] - The updated forecast for fiscal 2025 includes adjusted pretax income of at least $460 million, reflecting a year-over-year increase of at least $295 million [16][29] Business Line Data and Key Metrics Changes - Kyndryl Consult revenues grew 14% year-over-year in constant currency, accounting for 17% of total revenue [21][9] - Kyndryl Consult signings increased by 49% in constant currency, indicating strong demand for advisory services [21][9] - Hyperscaler-related revenue reached $210 million in Q1, on track to deliver nearly $1 billion for the year, doubling the fiscal 2024 total [23][20] Market Data and Key Metrics Changes - The company is experiencing growing demand for services due to increased cyber regulations, particularly in the EU [9] - The strength in Kyndryl Consult is attributed to the company's expertise in running and transforming IT estates, which is resonating with customers [5][6] Company Strategy and Development Direction - The company is focused on driving growth through Kyndryl Consult and Kyndryl Bridge, leveraging AI and automation to enhance service delivery [4][10] - The strategic emphasis is on shedding low-margin components of revenue and expanding relationships with alliance partners like Microsoft, Google, AWS, and SAP [9][15] - The company aims to pivot to growth in fiscal 2025, with expectations of returning to revenue growth in the fourth quarter [17][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving high single-digit adjusted pretax margins by fiscal 2027, supported by a shift towards higher-margin contracts [16][40] - The company is well-positioned to help customers optimize their IT environments and prepare for future investments as macroeconomic conditions improve [56][58] - Management highlighted the importance of bridging the gap between business line leaders and IT organizations to facilitate AI adoption [60][61] Other Important Information - The company plans to host its first post-spin Investor Day on November 21, 2024, to discuss future strategies and performance [18] - The company maintains a strong liquidity position with a cash balance of $1.3 billion and nearly $4.5 billion in total liquidity [27][28] Q&A Session Summary Question: Trends in signings composition - Management noted a consistent growth rate in Kyndryl Consult signings, indicating a shift towards advisory services while still maintaining substantial management run business [32][33] Question: Appetite for larger acquisitions - Management reiterated that acquisitions are not necessary for growth, focusing instead on small tuck-in acquisitions that complement existing expertise [35][36] Question: Confidence in margin growth - Confidence in margin growth is supported by consistent performance in signing contracts with high projected margins and the impact of the 3A's initiatives [38][39] Question: Drivers of Kyndryl Consult growth - Management attributed the 49% growth in Kyndryl Consult bookings to the company's unique expertise in run and transform capabilities, which are essential for customers [48][49] Question: Capital returns timeline - Management clarified that while $1 billion in pretax income is a target, capital returns could begin before reaching that figure, depending on adjusted pretax income levels [54] Question: Impact of interest rate changes - Management indicated that a decrease in interest rates could benefit the company by enabling customers to invest more in IT infrastructure and services [56][57] Question: AI implementation readiness - Management discussed the importance of preparing IT infrastructures for AI, emphasizing the need for collaboration between business and IT leaders [60][61] Question: Kyndryl Consult's outperforming position - Management highlighted the combination of deep engineering knowledge, industry-standard skills, and innovative solutions as key factors in Kyndryl Consult's success [66][67]

Kyndryl Holdings, Inc. (KD) came out with quarterly earnings of $0.13 per share, beating the Zacks Consensus Estimate of $0.12 per share. This compares to break-even earnings per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 8.33%. A quarter ago, it was expected that this company would post a loss of $0.12 per share when it actually produced a loss of $0.01, delivering a surprise of 91.67%. Over the last four quarters, the comp ...

Core Viewpoint - Kyndryl Holdings, Inc. reported financial results for the first quarter of fiscal year 2025, showing a decline in revenues but significant improvements in adjusted income metrics and continued growth in Kyndryl Consult services. Financial Performance - Revenues for the quarter ended June 30, 2024, totaled $3.74 billion, reflecting an 11% year-over-year decline and an 8% decline in constant currency [3][10] - The company reported pretax income of $64 million and net income of $11 million, compared to a net loss of $141 million in the prior-year period [3][22] - Adjusted EBITDA was $556 million, with adjusted pretax income increasing by 96% to $92 million compared to $47 million in the prior-year period [4][5] Growth Initiatives - Kyndryl Consult experienced double-digit revenue growth of 10% year-over-year and 14% in constant currency, with signings growing 49% year-over-year in constant currency [6][7] - The company recognized $210 million in revenue tied to cloud hyperscaler alliances, progressing towards a target of nearly $1 billion in fiscal year 2025 [7] - The AI-enabled Kyndryl Bridge operating platform is enhancing service delivery and creating additional revenue opportunities, contributing to annualized savings of approximately $650 million [7] Outlook - Kyndryl raised its adjusted earnings outlook for fiscal year 2025, projecting an adjusted EBITDA margin of at least 16.3% and adjusted pretax income of at least $460 million [9][10] - The company reaffirmed its outlook for constant-currency revenue growth of (2%) to (4%), implying fiscal 2025 revenue of $15.2 to $15.5 billion [10][11] Cash Flow and Expenses - Cash flow used in operations was $48 million in the quarter, reflecting a seasonally weak period for cash flow [3][22] - Adjusted free cash flow was reported at ($116) million, influenced by workforce rebalancing actions [5][34]

Core Viewpoint - Momentum investing focuses on "buying high and selling higher," contrasting with traditional strategies of "buying low and selling high" [1] Group 1: Momentum Investing Characteristics - Momentum investing can be risky as stocks may lose momentum when their valuations exceed future growth potential, leading to potential losses for investors [2] - A safer approach may involve investing in bargain stocks that have recently shown price momentum, utilizing tools like the Zacks Momentum Style Score to identify such opportunities [3] Group 2: Kyndryl Holdings, Inc. (KD) Analysis - Kyndryl Holdings, Inc. (KD) has shown a four-week price change of 6.4%, indicating growing investor interest [4] - Over the past 12 weeks, KD's stock has gained 34.6%, with a beta of 1.67, suggesting it moves 67% more than the market [5] - KD has a Momentum Score of B, indicating a favorable time to invest based on momentum [6] Group 3: Earnings Estimates and Valuation - KD has received upward revisions in earnings estimates, earning a Zacks Rank 2 (Buy), which is associated with strong momentum effects [7] - The stock is currently trading at a Price-to-Sales ratio of 0.39, suggesting it is undervalued as investors pay only 39 cents for each dollar of sales [7] Group 4: Additional Investment Opportunities - Besides KD, there are other stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, presenting further investment opportunities [8] - Investors can explore over 45 Zacks Premium Screens tailored to different investing styles to identify potential winning stocks [9]

Migration and Transformation: Kyndryl collaborates with customers to create customized business and technical transformation roadmaps tailored to optimize SAP systems and drive efficiencies. Kyndryl also leverages SAP Activate and its advanced data transformation tools and automation capabilities to support customers' transition to RISE with SAP. Kyndryl's comprehensive suite of tools, including advanced data mapping, automated data integrity and intelligent data archiving solutions, integrate with its agil ...

Company Performance - Kyndryl Holdings, Inc. closed at $27.63, with a gain of +1.28%, outperforming the S&P 500's gain of 1.08% on the same day [1] - Over the past month, shares of Kyndryl have increased by 6.9%, while the Business Services sector experienced a loss of 3.28% and the S&P 500 gained 0.43% [7] Earnings Estimates - The upcoming earnings report is scheduled for July 31, 2024, with a Zacks Consensus Estimate projecting revenue of $3.78 billion, reflecting a decrease of 9.86% from the previous year [2] - For the annual period, the Zacks Consensus Estimates anticipate earnings of $1.38 per share and revenue of $15.38 billion, indicating changes of +1354.55% and -4.21% respectively from last year [8] Analyst Estimates and Valuation - Recent revisions to analyst estimates indicate a positive outlook, with an 11.24% rise in the Zacks Consensus EPS estimate over the past month [4] - Kyndryl currently has a PEG ratio of 3.96, compared to the Technology Services industry's average PEG ratio of 1.41 [5] - The company has a Forward P/E ratio of 19.8, which is lower than the industry average Forward P/E of 23.07 [10] Industry Context - The Technology Services industry, part of the Business Services sector, has a Zacks Industry Rank of 144, placing it in the bottom 43% of all industries [11]

The Zacks Rank emphasizes earnings estimates and estimate revisions to find stocks with improving earnings outlooks. This system has a long record of success, and these stocks tend to be on track to beat the market over the next one to three months. Kyndryl Holdings, Inc. is currently sporting a Zacks Rank of #2 (Buy). Over the past three months, MediaAlpha, Inc.'s consensus EPS estimate for the current year has increased 131.9%. The stock currently has a Zacks Rank #2 (Buy). Kyndryl Holdings, Inc. is a mem ...