Business Today
Loading...

Earnings watch: Analysts see Infosys lowering growth projections further

All eyes will be on Infosys' guidance for the full year as it takes the lid off its earnings on Friday for the third quarter of financial year 2012/13. Market watchers expect India's third-largest IT services company to further trim its already-low organic growth guidance of 5 per cent for 2012/13.

twitter-logoGoutam Das | January 11, 2013 | Updated 09:25 IST

Goutam Das
On Friday, January 11, all eyes will be on Infosys' guidance for the full year as it takes the lid off its earnings for the third quarter of financial year 2012/13.

Market watchers expect India's third-largest IT services company, which is struggling to close deals due to the uncertain macro environment, to further trim its already-low organic growth guidance of 5 per cent for 2012/13.

Infosys acquired Swiss company Lodestone in September 2012 and if revenues from that buy are consolidated, the company's overall revenues may match up to its guidance of 5 per cent, say analysts.

PERSPECTIVE:Infosys eyes lost mojo in Lodestone buy

Bokerage Motilal Oswal expects Infosys to lower its organic revenue growth projections for the year to 3.5 per cent from the previous forecast of 5 per cent. As does Sharekhan. IDFC expects the guidance to be lowered by one per cent.

Historically, the December quarter is a tepid one for the IT industry because of fewer working days in overseas markets. However, this time, it also had other headwinds, including Hurricane Sandy, which forced many companies to shut down operations in parts of the US for a few days.

While holidays and Sandy will impact all IT companies, Infosys may be the worst hit considering that the company's execution machinery has been sluggish for many quarters now. The company is thus likely to lag peers in organic revenues.

2013 OUTLOOK:Infy sees a better year ahead for IT industry

IDFC sees Infosys' dollar revenues for the December quarter growing two per cent over the September quarter, behind TCS (four per cent) and HCL (three per cent). When the contribution from the Lodestone acquisition is taken into account, the brokerage expects Infosys to log 4 per cent growth.

Motilal Oswal expects the acquisition to add an estimated $40 million of incremental revenues to the company's third-quarter top line. In a report, the brokerage said that the company's top line would rise 3.3 per cent over the previous quarter to $1,857 million. EBIT (earnings before interest and taxes) margins, the brokerage estimates, could decline 130 basis points to 25 per cent on account of wage hikes and because Lodestone has a lower margin profile than Infosys.

Sharekhan has even lower expectations. It sees Infosys' organic revenues growing just 1.3 per cent.

"People will watch out for the company's organic growth numbers tomorrow (January 11)," says Sanjeev Hota, an analyst with the brokerage. "If organic growth is lower than one per cent, the stock will get negatively impacted," he adds.

MUST READ:Guidance reports hold vital clues for investors

Investors will also be keeping tabs on the management's commentary around its 2013 budgets and billing rates.

Infosys shares on Thursday were trading down 0.48 per cent at Rs 2,317 in noon trade at the Bombay Stock Exchange.

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close