Infosys may top forecast in Q2, but cut in FY12 view likely
Technology bellwether Infosys will announce its results on Wednesday. The first quarter was a disappointment with higher wages and currency fluctuations hurting margins. The mood is little upbeat now as the rupee depreciation in recent months is expected to boost its July-September earnings.
October 11, 2011 / 16:21 IST
Moneycontrol Bureau
Technology bellwether Infosys will announce its results on Wednesday. The first quarter was a disappointment with higher wages and currency fluctuations hurting margins. The mood is little upbeat now as the rupee depreciation in recent months is expected to boost its July-September earnings. But anxiety remains on the outlook for the rest of this fiscal and the next, due to continued macro-economic problems in US and large tracts of Eurozone. Infosys could even beat earlier forecast in the second quarter, helped by the currency tailwinds, say some analysts. However, the outlook remains hazy due to continued uncertainties in US and Europe, key markets for software service providers.Infosys derives 70% of its revenue from US and Europe, so the debt crisis in Eurozone and the unemployment and economic uncertainty in the US is a huge concern. Infy management had already warned post the first quarter earnings that there were issues in Europe that were creating delays in decision making, and the company would be cautious due to the economic instability.So what would one watch out for when Infosys announces second quarter earnings on Wednesday?Nomura Equity Research analyst Ashwin Mehta expects Infosys could outperform earnings guidance by almost 18% in the second quarter. Infosys only has 10% of its expected US dollar revenues hedged. So its margins in July-September are expected to improve due to the recent rupee depreciation.But expect Infosys to cut its full year revenue growth guidance to around 16-18% versus 18-20% earlier, partly on cross currency impacts, and partly on the fact that there will be some deferment in terms of discretionary projects, he said.The market will be keenly watching management view on the outlook going forward and commentary on any delays in deal closures or deferrals in budget spends.Abhishek Shindadkar and Aishwariya KPL of ICICI Direct.com say their conversations with tier 1 IT vendors suggests that there have been no cancellations or delays in maintenance projects yet, but persistent uncertainty could delay decision cycle with "doing more for less" getting louder.There has been renewed buying interest among investors for IT stocks in last few weeks. The NSE IT index is up over 12% in the last one month, while the broader Nifty index has only risen 0.7%. Infosys stock has risen almost 18%, although it was down 2% on Tuesday. While analysts say some cut in Infosys
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