INFY In Line, Lowers REV Guidance - Analyst Blog

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Infosys Technologies Limited ( INFY ) reported third quarter 2012 earnings per ADS from continuing operations of 80 cents, which was in line with the Zacks Consensus Estimate. Earnings grew 3.4% sequentially and grew 13.9% year over year, led by growth in all areas and across the customer base.

Business Details

Total revenue for the quarter was $1.8 billion, representing a year-over-year growth of 13.9%. The company saw growth in retail and manufacturing and also in banking, insurance and financial services. Quarterly revenues were also in line with the Zacks Consensus Estimate.

The company had a good quarter in terms of client additions. Infosys added 49 new clients during the quarter out of which 6 were from the Fortune 500. Year to date, the company has 120 net client additions.

Income

The company recorded an operating profit of $560 million compared with $479 million in the prior-year period. Net income after tax was $458 million, up 15.4% year over year. For the reported quarter, operating margin increased 3% year over year to 31% from 28% while net margin also grew from 23.5% to 25.4% year over year.

Balance Sheet

Infosys maintains a strong liquidity position with cash & cash equivalents, including investments in available-for-sale financial assets and certificates of deposits, amounting to $3.7 billion at the end of the quarter.

Outlook

For the quarter ending March 31, 2012, Infosys expects revenues to be in the range of $1.80 billion to $1.81 billion, up 12.7% to 13.0% year over year. Earnings per ADS are expected to be 81 cents, up 15.7% from the year-ago quarter.

For the fiscal year ending March 31, 2012, the company lowered its revenue guidance. Revenues are now expected to be in the range of $7.02 billion to $7.03 billion compared to $7.25 billion guided earlier. Earnings per ADS are expected to be $3.00 compared to a range of $2.88 to $2.92 guided earlier.

Summary

Although the demand in the financial services vertical appears stable, the primary factor impacting revenue guidance was budget delays. However, the company has not witnessed any cancellations or push outs of projects to date.

The company's conservative approach to commodity work (low-margin work) has had an impact on the guidance, but this is not necessarily a negative, since there should be a positive effect on profitability. In addition, the offshore business is expected to continue to gain momentum.

Further, the company's recent acquisition of Australia-based Portland Group is expected to expand the company's presence in the Australian market and is expected to be neutral to earnings.

Infosys currently holds a Zacks Rank of #3, which implies a short term Hold rating on the stock.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

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