Why Syntel, Inc. Shares Got Clobbered Today

What happened

Shares of IT outsourcing specialist Syntel (NASDAQ: SYNT) have gotten clobbered today, down by 17% as of 1 p.m. EST, after the company reported fourth-quarter earnings.

So what

Revenue in the fourth quarter fell 7% to $237.9 million, slightly above the $237 million in sales that analysts were modeling for. Earnings per share was $0.57, also narrowly beating expectations of $0.55 per share in profit.

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Gross margin came in at 40.2%, a sequential improvement but a year-over-year decline. Syntel had previously recognized a one-time tax expense of $271 million in the third quarter related to cash repatriation.

Now what

Syntel interim CEO and President Rakesh Khanna acknowledged that the company had been "impacted by challenges seen across several industries" throughout 2016, but is confident that 2017 will be stronger as Syntel focuses on helping clients improve operational flexibility by helping modernize existing IT assets. Guidance for 2017 calls for revenue in the range of $900 million to $945 million with earnings per share of $1.75 to $2; the outlook is predicated on current exchange rates of 67 Indian rupees to the U.S. dollar, and currency volatility may affect the company's financial performance.

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Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.