Infosys plunges as outlook disappoints Wall Street

Infosys drops 20 percent as revenue forecast, lack of earnings estimate worry investors

Associated Press

NEW YORK (AP) -- Shares of Infosys Ltd. tumbled Friday on concerns about the Indian outsourcing giant's guidance for this fiscal year.

THE SPARK: The company's net income rose 39 percent in its most recent fiscal year, it said Friday. But it didn't provide a profit forecast for the fiscal year that started in April. It did say revenue will grow 6 to 10 percent.

That implies revenue of $7.8 billion to $8.1 billion — analysts expected $8.3 billion, according to FactSet.

Analysts also predicted profit of $3.25 per share. The company's profit in the year that just ended was $3.02 per share.

THE BIG PICTURE: Infosys said on Friday that the U.S. market was "extremely fragile." The U.S. government's across-the-board spending cuts that took effect on March 1 may be denting the outsourcer's business.

THE ANALYSIS: Janney Capital Markets analyst Joseph Foresi noted that the company's prices declined. He rates the shares "Neutral" with a price target of $51 per share.

At least one analyst was optimistic, however — even though he has a "Negative" rating on the stock. Susquehanna Financial Group analyst James Friedman said there were encouraging signs in Infosys' results, including greater volume, more business in Europe and more revenue from banking and manufacturing. Friedman said investors and Wall Street expected too much too quickly. He has a price target of $38, implying he expects shares to full further.

SHARE ACTION: Infosys stock plunged $11.09, or 20 percent, to $43.25 in afternoon trading. The company's U.S.-traded shares had been up 28 percent in 2013 through Thursday's close.

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