Infosys to announce Q3 earnings on Friday; here are 5 key
things to watch out
The key things to watch out for would be its full year
guidance and management commentary. Overall it is expected to be soft quarter
due to seasonality.
Infosys, the country's second largest software services
provider, will announce its third quarter earnings on Friday. The key things to
watch out for would be its full year guidance and management commentary.
Overall it is expected to be soft quarter due to seasonality.
The stock rallied 15.6 percent in quarter ended December
2017, trading at 14.3 times its FY19 EPS.
As it is seasonally a weak quarter for IT companies due to
holidays in western markets, here are five key factors that investors will
focus on:-
Profit
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Infosys is expected to report profit for the quarter at Rs
3,609 crore, down 3.14 percent compared to Rs 3,726 crore in previous quarter,
according to average of estimates of analysts polled by CNBC-TV18.
Weak earnings before interest & tax (EBIT) and low other
income may pull profit lower during the quarter.
Revenue
Analysts expect company's revenue to grow 1.5 percent
sequentially to Rs 17,823 crore from Rs 17,567 crore.
Dollar revenue may grow 1 percent to USD 2,754 million from
USD 2,728 million QoQ and constant currency growth is expected to be at 1
percent.
Retail was soft in Q2 and that is expected to be weak in Q3
also.
Operational Performance
Operational efficiency levers have been squeezed materially
over the last few quarters, so margin expansion might be limited during the
quarter.
EBIT margin is likely to contract at 24.1 percent in Q3FY18,
compared to 24.2 percent in Q2FY18.
Analysts see negligible cross currency impact on earnings.
Guidance
Full year guidance is the most important factor to watch out
for in earnings.
All analysts expect Infosys to maintain its full year
constant currency revenue growth guidance at 5.5-6.5 percent and EBIT margin at
23-25 percent.
After Q2FY18 earnings, the company had revised its FY18
guidance lower to 5.5-6.5 percent YoY, implying an ask rate of 0.4-1.6 percent
for second half of FY18.
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