Infosys Technologies Limited ( INFY ) reported
fourth-quarter 2013 financial results with earnings per ADS from
continuing operations of 78 cents, beating the Zacks Consensus
Estimate of 74 cents by 5.4%. However, earnings were down 3.7% year
over year and 2.6% sequentially. Year-over-year earnings were
impacted by a decline in margins and challenging global economic
Total revenue for the quarter was $1.93 billion, up 9.4% year
over year and 1.4% sequentially. The increase was driven by the
company's strategic action to offer flexible pricing to customers,
in order to boost sales. Further, sales growth in Europe and India
also contributed to the top line growth.
The company delivered a decent quarter in terms of client
additions. During the reported quarter, Infosys added 12 new
clients for its products and platforms. Apart from this, Infosys
and its subsidiaries added 56 clients during the quarter. The
company's cloud-based offerings continued to gain good momentum
during the quarter.
Infosys recently announced that it has been selected as the
worldwide partner by German automaker BMW Group for application
basis infrastructure management services. As per the agreement,
Infosys will deliver maintenance and operational services for the
web infrastructure, content management, SAP Basis operations and IT
network of BMW Group.
This apart, Infosys has also opened a new delivery center for
business process outsourcing subsidiary, Infosys BPO, in San José,
Costa Rica. The new facility will primarily provide services in the
areas of strategic sourcing and procurement for Procter
& Gamble Co . ( PG ).
Revenue by Geographical Segment
During the reported quarter, revenue in North America grew 0.1%
in constant currency. In Europe, revenues grew 5.7% sequentially
and 6.5% in constant currency. Revenues from the Indian region grew
10.0% sequentially, while revenues from the Rest of the World
declined 1.5% both sequentially and 0.9% in constant currency.
Revenues by Industry segment
Revenues in the Financial Services segment (FSI) grew 2.3%
sequentially and 2.7% in constant currency during the fourth
quarter of 2013. Manufacturing segment (MFG) revenues increased
3.8% sequentially and 3.9% in constant currency. Revenues from the
Retail and Life Sciences division (RCL) grew 0.5% sequentially and
0.8% in constant currency, while revenues from the Energy,
Utilities, Communications & Services (ECS) declined 1.4%
sequentially and 1.0% in constant currency.
The company recorded an operating profit of $457 million
compared to $528 million in the prior-year period, reflecting a
decline of 13.8% year over year. Operating margin also contracted
623 basis points year over year to 23.6% from 29.8% in the
comparable prior-year quarter. The decline in margin was primarily
attributable to the company's liberal pricing strategy to improve
volumes and sales going forward.
Net profit after tax was $444 million for the quarter, which was
down 4.1% year over year. Higher operating expenses impacted profit
during the quarter.
Infosys maintains a strong liquidity position and has cash &
cash equivalents of $4.02 billion as of Mar 31, 2013 compared with
$4.05 billion as of March 31, 2012.
Concurrent with the earnings release, management provided a
brief outlook for fiscal 2014. Revenues are expected to increase in
the range of 6% to 10.0%. According to a report by Moneycontro
Bureau, revenue guidance is lower than 12% to 14% growth that
industry body Nasscom expects for the sector as a whole.
Infosys reported a modest fourth quarter and margin contraction
will remain a concern going forward as the company expects to
continue with its pricing policy. Moreover, Infosys' full-year
guidance reflects sluggish revenue growth amid a volatile
macroeconomic environment, which is expected to hurt profitability
in the near term.
Infosys currently has a Zacks Rank #3 (Hold) on the stock. Two
other companies operating in the same industry Cognizant
Technology Solutions ( CTSH ) and
Accenture PLC ( ACN ) also have a Zacks
Rank #3 (Hold).ACCENTURE PLC (ACN): Free Stock Analysis ReportCOGNIZANT TECH (CTSH): Free Stock Analysis
ReportINFOSYS LTD (INFY): Free Stock Analysis ReportPROCTER & GAMBL (PG): Free Stock Analysis
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