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Infosys (INFY) Rallies 4% as Q3 Earnings Beat Estimates

Infosys INFY stock was trading nearly 4% higher during the pre-market trading session today after the India-based IT services provider reported better-than-expected third-quarter results and raised its revenue forecast for fiscal 2022. The company’s fiscal third-quarter earnings of 18 cents per share surpassed the Zacks Consensus Estimate by a penny and grew 11.2% year over year.

Infosys’ fiscal third-quarter revenues increased 20.9% to $4.25 billion year over year and topped the Zacks Consensus Estimate of $4.08 billion. In terms of constant currency (cc), the metric was up 21.5%.

A rise in large deal wins amid the ongoing digital transformation wave was a key catalyst. Infosys continued to fortify its digital capabilities. The Infosys CobaltTM cloud portfolio witnessed solid traction.

Infosys Limited Price and EPS Surprise

Infosys Limited price-eps-surprise | Infosys Limited Quote

Revenue Details

Digital Revenues (58.5% of the total) climbed 41.2% year over year (42.6% at cc) to $2.49 billion, while Core Revenues (41.5%) rose 0.5% (up 0.6% at cc) to $1.76 billion.

Revenues across India, North America, Europe and the Rest of the World regions recorded year-over-year increases of 38.4%, 21.3%, 25.4% and 5.9%, respectively, on a reported basis. On a cc basis, India, North America, Europe and the Rest of the World registered growth of 40.1%, 21.4%, 27.2% and 6.7%, respectively.

Segment-wise, Manufacturing registered the highest growth of 46.4%. Life Sciences, Financial Services, Communication and Retail jumped 28.3%, 15%, 21.7% and 19.4%, respectively. Energy, Utilities, Resources & Services and Hi-Tech divisions recorded year-over-year revenues of 13.2% and 18.6%, respectively. Moreover, sales at the Others business segment increased 33.9%.

The company added 111 clients during the fiscal third quarter. It also signed multiple large deals of a contract value worth $2.53 billion.

The company reported that its clients, worth more than $100 million, now add up to 37, up from the previous quarter’s 35 clients and 29 clients at the end of the year-ago quarter.

Other Financial Details

Gross profit climbed 12.3% year over year to $1.39 billion. However, gross margin contracted 250 basis points (bps) on a year-over-year basis to 32.8%.

The company’s operating income jumped 11.7% to $998 million year over year. Operating margin declined 190 bps to 23.5%.

Infosys ended the fiscal third quarter with cash and cash equivalents of $2.15 billion, down from $2.43 billion recorded at the end of second-quarter fiscal 2022.

Raises FY22 Revenue Guidance

Buoyed by stronger-than-expected fiscal third-quarter performance, Infosys raised its revenue outlook for the full fiscal year. The company now expects annual revenues to grow between 19.5% and 20% year over year at cc, up from the previous forecast of a 16.5-17.5% increase. It kept the operating margin guidance range of 22-24% unchanged.

Zacks Rank & Other Stocks to Consider

Currently, Infosys carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader technology sector include Broadcom AVGO, Apple AAPL and Jabil JBL. While Broadcom sports a Zacks Rank #1 (Strong Buy), Apple and Jabil each carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Broadcom’s first-quarter fiscal 2022 earnings has been revised upward by 8.1% to $8.15 per share over the past 60 days. For fiscal 2022, earnings estimates have moved upward by 6.5% to $33.03 per share over the past 60 days.

Broadcom’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 1.4%. Shares of AVGO have rallied 37.9% in the trailing 12 months.

The Zacks Consensus Estimate for Apple’s first-quarter fiscal 2022 earnings has been revised upward by a penny to $1.89 per share over the past 30 days. For fiscal 2022, earnings estimates have moved upward by four cents to $5.82 per share in the past 30 days.

Apple’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while meeting the same on one occasion, the average surprise being 22.3%. AAPL stock has rallied 33.8% over the past year.

The Zacks Consensus Estimate for Jabil’s second-quarter fiscal 2022 earnings has been revised upward to $1.47 per share from $1.41 30 days ago. For fiscal 2022, earnings estimates have been revised upward by 25 cents to $6.58 per share in the past 30 days.

Jabil’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 18.1%. Shares of JBL have rallied 58% over the past year.


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