Infosys (INFY) to Report Q4 Earnings: What's in the Offing?

Infosys Limited INFY is expected to report fourth-quarter fiscal 2020 results on Apr 10.

Over the trailing four quarters, the company’s earnings came in line with the Zacks Consensus Estimate on two occasions, beat in another and missed in the other, the average positive surprise being 0.00%.

In the last reported quarter, the company’s adjusted earnings of 15 cents per share surpassed the Zacks Consensus Estimate by a penny. Revenues of $3.24 billion increased 8.6% year over year but missed the consensus mark of $3.25 billion. In terms of constant currency (CC), revenues were up 9.5%.

For the fiscal fourth quarter, the Zacks Consensus Estimate for revenues is pegged at $3.29 billion, suggesting 7.5% growth from the year-ago reported figure. The Zacks Consensus Estimate for earnings stands at 14 cents, calling for a decline of 7.7% year over year.

Infosys Limited Price and Consensus

Infosys Limited Price and Consensus

Infosys Limited price-consensus-chart | Infosys Limited Quote

 

Let’s see how things have shaped up prior to this announcement.

Factors to Consider

Infosys’ fiscal fourth-quarter performance is likely to have benefited from large deal wins and growth in digital services. The company’s efforts to reinforce its digital-transformation capabilities for expanding and solidifying its position in the highly competitive environment remain a steady tailwind.

Furthermore, strong demand for cloud, IoT, security, and data-analytics solutions and services is expected to have driven the company’s quarterly revenues. Also, higher investments by clients in digital transformation, artificial intelligence and automation are anticipated to have been conducive to its performance.

Notably, in the fiscal third quarter, the company added 84 clients. It also signed 14 crucial pacts with a total contract value (TCV) worth $1.8 billion. Seven of these were in Financial Services, two each in Communication and Manufacturing vertical, and one each in Retail, Energy, Utilities, Resources and Services and other segment. Geographically, eight were from America, five from Europe and one from Rest of the World.

Although headwinds in the financial services segment are still a concern, growing traction in the commercial and corporate bank, consumer, cost and payments, wealth management and custody, plus mortgage portfolios of its business is an upside.

Nonetheless, higher employee compensation to counter the rising attrition might have strained the fiscal fourth-quarter operating margin. Moreover, inflated investments in sales and localization, and escalating costs to grab large deals are expected to have hurt Infosys’ bottom-line numbers during the quarter under discussion.

What Our Model Says

Our proven model does not predict an earnings beat for Infosys this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Infosys currently carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their soon-to-be-reported quarterly results:

InterDigital, Inc. IDCC has an Earnings ESP of +152% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Q2 Holdings, Inc. QTWO has an Earnings ESP of +4.35% and carries a Zacks Rank of 2, at present.

Synopsys, Inc. SNPS has an Earnings ESP of +2.69% and carries a Zacks Rank of 2, currently.

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