Home Americas Infosys Beats Estimates In The Second Quarter, But Slashes Full Year Guidance
Infosys Beats Estimates In The Second Quarter, But Slashes Full Year Guidance

Infosys Beats Estimates In The Second Quarter, But Slashes Full Year Guidance

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Infosys Ltd.’s operational performance in the July to September quarter surpassed analyst estimates, but the stock fell as the company lowered its annual sales guidance for the second time this year.Net profit rose 5.1 percent to Rs 3,610 crore, compared to Rs 3,436 crore in the previous quarter, according to its filing on the stock exchanges. The consensus of analyst estimates tracked by Bloomberg stood at Rs 3,528 crore.

Revenue grew 3.2 percent to Rs 17,310 crore on a quarter-on-quarter basis, beating Bloomberg’s consensus estimate of Rs 17,179 crore.Revenue in U.S. dollar terms rose 3.4 percent to $2.58 billion, compared to $2.5 billion in the previous quarter.

Earnings before interest and tax improved 6.5 percent to Rs 4,309 crore, from Rs 4,047 crore in the April to June quarter. EBIT margin expanded to 24.9 percent from 24.1 percent. The margin improvement was driven by better operational efficiency, Chief Financial Officer Ranganath D Mavinakere said in the press release.

The company clocked operating margins of 24.5 percent in the first half of the fiscal year. Infosys expects to maintain margins in the 24 to 25 percent range for the rest of the year, the CFO added in the media briefing.

Guidance Dampener

Infosys slashed its annual sales forecast for the second time in three months. Sales in constant currency terms is expected to grow 8 to 9 percent this financial year, compared to the 10.5 to 12 percent forecast given in July. Sales in dollar terms is projected to grow 7.5 to 8.5 percent, compared to 10.8 to 12.3 percent earlier.

“We have revised our guidance based on current situation in the industry,” Chief Executive Officer Vishal Sikka said. The industry is seeing structurally challenging times, Sikka added, even as he maintained the company’s $20 billion revenue by 2020 target.

The guidance revision is neither aggressive nor conservative and the management is being realistic, Girish Pai, the head of research of institutional equities at Nirmal Bang told BloombergQuint. The revised constant currency revenue guidance of 8 to 9 percent is a tad lower than the 8.5 to 9.5 percent band that Pai had expected.Nirmal Bang maintains a ‘sell’ rating on the stock and is likely to revise its Rs 980 per share target price downwards, Pai added.

Verticals: More Pros Than Cons
The Infosys management raised also concerns over curtailed discretionary spending by its clients in the U.S. The banking and financial services and retail verticals will be muted in the next few quarters, Chief Financial Officer Pravin Rao said.

But for the quarter, the financial services vertical posted a 3 percent sequential growth. The energy, utilities, communications and services segment grew 3.9 percent and the life sciences segment grew 4.2 percent. Weakness however came from the retail and consumer segment, which posted a 1 percent revenue decline, and the manufacturing sector, which registered 0.5 percent growth.

Source:bloombergquint.

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Anand Gupta Editor - EQ Int'l Media Network

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