Is a Beat Likely for Infosys (INFY) This Earnings Season?
Infosys Limited INFY is likely to beat expectations when it reports third-quarter fiscal 2023 results before market open on Jan 12.
Over the trailing four quarters, the India-based IT services provider’s earnings beat the Zacks Consensus Estimate once, met the same on one occasion and missed it twice, the average beat being -2.6%.
In the last reported quarter, Infosys’ adjusted earnings of 18 cents per share matched the Zacks Consensus Estimate while increasing 5.9% year over year. Revenues of $4.56 billion jumped 13.9% year over year and matched the consensus mark.
The Zacks Consensus Estimate for fiscal third-quarter revenues is pegged at $4.66 billion, suggesting a 9.7% increase from the year-ago period. The consensus mark for earnings stands at 19 cents per share, 5.6% higher than the year-ago quarter.
Let’s see how things have shaped up before this announcement.
Infosys Limited Price and EPS Surprise
Infosys Limited price-eps-surprise | Infosys Limited Quote
Factors to Consider
Continued large deal wins and growth in digital services are likely to have driven INFY’s quarterly revenues during the to-be-reported quarter. The company’s efforts to reinforce digital transformation capabilities for expanding and solidifying its position in the highly competitive environment are a steady tailwind.
Infosys added 103 clients in the second quarter of fiscal 2023. It also signed multiple large deals of a contract value worth $2.7 billion.
Infosys’ third-quarter performance is likely to have benefited from the stellar demand for the cloud, data analytics solutions and services, the Internet of Things, and security products and solutions. Also, higher investments by clients in digital transformation, AI and automation are anticipated to have been conducive to its fiscal third-quarter performance.
The growing traction of its solutions and services in the commercial and corporate banks, consumer, cost and payments, wealth management and custody and mortgage portfolios of its business is likely to have been an upside during the quarter under review.
However, the Indian software giant’s decision to move its business out of Russia following Moscow’s war against Ukraine is likely to have somewhat negatively impacted the top line in the third quarter. Also, inflationary pressures and possible global slowdown concerns are anticipated to have led many organizations to push their large IT investments.
Additionally, inflated investments in sales and localization and rising costs to grab large deals might have hurt Infosys’ bottom line during the quarter under discussion.
Earnings Whisper
Our proven model predicts an earnings beat for INFY this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.89% for Infosys. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: Infosys carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Stocks With the Favorable Combination
Per our model, MSCI MSCI, CACI International CACI and Lam Research LRCX also have the right combination of elements to post an earnings beat in their upcoming releases.
MSCI carries a Zacks Rank #2 and has an Earnings ESP of +2.34%. The company is scheduled to report its fourth-quarter 2022 results on Jan 31. MSCI’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing the same once, the average surprise being 3.7%.
The Zacks Consensus Estimate for MSCI’s fourth-quarter earnings stands at $2.71 per share, implying a year-over-year increase of 8%. MSCI is estimated to report revenues of $564.5 million, which suggests growth of 2.7% from the year-ago quarter.
CACI is slated to report second-quarter fiscal 2023 results on Jan 25. The company has a Zacks Rank #3 and an Earnings ESP of +1.90% at present. CACI’s earnings beat the Zacks Consensus Estimate twice in the trailing four quarters while missing the same on two occasions, the average surprise being -1.1%.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $4.33 per share, suggesting an improvement of 13.1% from the year-ago quarter’s earnings of $3.83. CACI’s quarterly revenues are estimated to increase 8% year over year to $1.6 billion.
Lam Research carries a Zacks Rank #3 and has an Earnings ESP of +0.42%. The company is slated to report second-quarter fiscal 2023 results on Jan 25. Lam Research’s earnings surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 7.4%.
The Zacks Consensus Estimate for LRCX’s second-quarter earnings is pegged at $9.96 per share, indicating a year-over-year increase of 16.8%. The consensus mark for revenues stands at $5.1 billion, suggesting a year-over-year increase of 20.3%.
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