SENSEX NIFTY
Apr 13, 2012, 08.42 AM IST | Source: Moneycontrol.com

Key things to watch out for in Infosys Q4 earnings

The earnings season will pick up pace with Infosys reporting its fourth quarter earnings on Friday. The market will keenly eye the tech bellwether's results, and its guidance in particular will set the direction for the overall IT industry.

Moneycontrol Bureau

The earnings season will pick up pace with Infosys reporting its fourth quarter earnings on Friday. The market will keenly eye the tech bellwether's results, and its guidance in particular will set the direction for the overall IT industry.

The Jan-March quarter is typically a muted quarter for software service providers and Infosys had guided for near-zero growth in dollar revenue for the three-month period.

Analysts expect Infosys will beat its 0-0.2% guidance and report a 1% USD revenue uptick in the fourth quarter. However, in rupee terms revenue could decline 1-2% as rupee averaged at around Rs 50 per US dollar, compared with Infosys' earlier forecast of Rs 52.

The rupee appreciation coupled with a dip in realization could impact margins, say analysts.

Infosys' net profit is expected to rise over 20% year-on-year in Jan-March, but is seen down around 3-5% sequentially.

But more then that it's the guidance that's key, as uncertainties in the global economy, led by the Euro zone debt crisis weigh on IT companies.

Infosys had warned post the third quarter earnings that the global economy, driven by slower growth in developed markets, coupled with the European crisis, could impact IT industry growth.  

Decision making delays by clients had delayed ramp-ups, so the street will watch out for any commentary on the overall growth picture in US and Europe.

"We believe Infosys to guide for 13-16% FY13 USD revenue growth, ahead of Nasscom's 11-14% for the sector and 13% baked into consensus current estimates. Completion of organizational restructuring that affected FY12 growth; ramp-ups in estimated USD 2.5 billion large deal wins over nine-months FY12 and a benign pricing outlook should help," said Pankaj Kapoor and Apoorva Oza of Standard Chartered.

Nomura analysts Ashwin Mehta and Pinku Pappan expect Infosys will guide for 10-13% USD revenue growth for the current fiscal year.

Apart from the revenue guidance, margin outlook for fiscal 2013 and discretionary demand trend will be key issues to watch out for from Infosys, the Nomura analysts say.

Wage hikes for fiscal 2013, growth trends in areas like banking and financial services vertical and commentary on pricing and on-site hiring will also be focused on, say the Standard Chartered analysts.

Adjusted for currency, Infosys margins have declined 300 basis points over past nine months and Ashish Chopra of Motilal Oswal sees limited room for further margin expansion.

Infosys shares closed down 1.9% at Rs 2750.65 on NSE on Thursday. The stock is down about 0.6% since December-end. The broader Nifty index has gained 14% over the same period.

Nachiket Kelkar
nachiket.kelkar@moneycontrol.com

Set email alert for

ADS BY GOOGLE

video of the day

All portents good; optimistic for next few Diwali's: Damani

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.