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    Infosys Q3 results today: How stock may move; what will D-Street look for in earnings numbers

    Synopsis

    Infosys Ltd is likely to report strong double-digit year-on-year (YoY) growth in both the topline and bottomline due to strong deal pipeline and execution. Consolidated revenue is seen rising nearly 19% on year, and 4% sequentially to Rs 37,890 crore, according to the average of estimates given by 10 brokerages. The net profit is seen rising 11% on year and 7.2% sequentially to Rs 6,455.40 crore.

    Infosys Q3 results today: How stock may move; what will D-Street look for in earnings numbersETtech
    After IT bellwether Tata Consultancy Services’ Q3 results, Dalal Street’s eyes will be on another software major Infosys, which will detail its December quarter earnings after market hours on Thursday.

    While TCS reported good numbers for the third quarter, it failed to provide concrete outlook on growth and deal pipeline in the wake of a slowdown in the major markets – North America and Europe.

    It will be interesting to see if Infosys manages to throw some light and give a picture on the digital spending trend in key industries and markets.

    Historical stock performance

    In the last 19 quarters, shares of Infosys have gained most of the times prior to the earnings, but the performance has been mixed post earnings.

    In the last 19 quarters, Infosys shares have fallen only 5 times prior to earnings, while they have declined 9 times post earnings.

    Post the September quarter earnings, the stock rose sharply by around 4% as the company surprisingly raised its earnings growth guidance for FY23.

    The maximum fall the stock has seen was post the March quarter earnings for FY22. The stock had fallen by more than 7%.



    “If history is to repeat, there is a 50% chance of a 9% move in Infosys post earnings,” says Anand James, chief market strategist at Geojit Financial Services.

    Out of the four times when the percentage return during the previous 15 days of earnings were negative, 3 times Infosys saw an average 15% move in the next 30 days, he said.

    Earnings expectation

    Infosys Ltd is likely to report strong double-digit year-on-year (YoY) growth in both the topline and bottomline due to strong deal pipeline and execution. Consolidated revenue is seen rising nearly 19% on year, and 4% sequentially to Rs 37,890 crore, according to the average of estimates given by 10 brokerages. The net profit is seen rising 11% on year and 7.2% sequentially to Rs 6,455.40 crore.

    5 major things to watch out for:
    Guidance: While the near-term outlook for the IT sector remains murky in view of the economic slowdown in the US and Europe, most analysts expect Infosys to retain its sales growth and margin guidance for the current financial year.

    Infosys had guided for a 15-16% growth in sales in constant currency terms for FY23, and a 21-22% operating margin, calculated as earnings before interest and tax (EBIT).

    Constant currency growth: December quarter is seasonally weak for the sector due to higher furloughs and year-end holidays. For Infosys, furloughs and cross-currency headwinds are likely to restrain the constant currency sales growth at about 1.5-1.8% sequentially. Analysts would want to gauge if growth will remain around these levels in the next few quarters.

    Attrition: The sector did see some cooling off in attrition rates in the September quarter. Analysts would want to see if Infosys has been able to bring down attrition further in the last quarter, and what were the net employee additions. Peer TCS saw net employee addition fall by more than 2,000 in the December quarter, the first time in 10 quarters.

    Geographical performance: Given that North America and Europe are showing signs of slowdown, growth in these two markets will be closely monitored. TCS saw a double-digit growth in both North America and the UK, while the growth was in single digits for Europe, and the company had highlighted heightened uncertainty in this market when compared to North America and the UK.

    Margin trend: Analysts see a 20-80 basis points expansion in margin sequentially for Infosys, which is way lower than the 150 bps expansion seen in the second quarter.

    “We expect EBIT margins to improve by 80 bps QoQ, led by easing supply-side pressures weaker rupee partially offset by lower utilization due to higher furloughs,” Sharekhan said in its report.

    (Data inputs from Ritesh Presswala)

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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