Infosys (INFY) to Report Q2 Earnings: What's in Store?
Infosys Limited INFY is slated to report second-quarter fiscal 2024 results on Oct 12. Over the trailing four quarters, this India-based IT services provider’s earnings met the Zacks Consensus Estimate twice and missed the same on the remaining two quarters, delivering an average negative surprise of 2.7%.
In the last reported quarter, Infosys’ adjusted earnings of 17 cents per share missed the Zacks Consensus Estimate of 18 cents, but improved 6.3% year over year. Revenues of $4.62 billion beat the consensus mark of $4.55 billion and also grew 3.9% year over year.
The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $4.57 billion, indicating a marginal 0.3% increase from the year-ago period’s level. The consensus mark for earnings is pinned at 18 cents per share, flat year over year.
Infosys Limited Price and EPS Surprise
Infosys Limited price-eps-surprise | Infosys Limited Quote
Let’s discuss the factors that are likely to be reflected in the upcoming quarterly results.
Factors to Note
Infosys’ second-quarter results are likely to reflect the negative impact from slowing IT spending as organizations are postponing their plans of investing in big and expensive technology products. They are doing so due to growing global slowdown concerns amid persistent macroeconomic headwinds and geopolitical tensions.
The company has been witnessing continued softness across its Financial Services business unit owing to delayed decision making by its clients. The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.29 billion, implying a 7.2% decline from the year-ago quarter’s level.
Though clients are focusing on leveraging artificial intelligence (AI) to accelerate digital transformation, long decision cycles are likely to have negatively impacted INFY’s Retail segment’s second-quarter top-line performance. We expect the vertical’s revenues to have declined 1.7% year over year to $636 million.
Budget cuts, slow ramp-up and delayed decision making for new spending amid the ongoing macroeconomic headwinds are anticipated to have hurt Communication business unit’s performance in the quarter. Our estimate for the segment’s revenues is pegged at $539.7 million, indicating a decline of 3.8% from the year-ago quarter’s reported number.
Despite headwinds from slow decision making, increased spending toward large-scale transformation programs such as enhancing digital capabilities for energy transition and achieving net zero emission are expected to have boosted Infosys’ Energy, Utilities, Resources and Services vertical performance in the second quarter. We expect the segment’s top line to have increased 2.5% year over year to $575.1 million.
Accelerated transition to cloud and focus on increasing productivity by switching to smart factories and products are likely to have boosted the Manufacturing business unit’s revenues in the to-be-reported quarter. Our estimate for the segment’s revenues is pegged at $592.7 million, indicating an increase of 1.7% from the year-ago quarter’s level.
Additionally, inflated investments in sales and localization and rising costs to grab large deals are expected to have impacted Infosys’ bottom line in the to-be-reported quarter.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Infosys this time around. 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. However, that’s not the case here.
Infosys currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Per our model, Vertiv VRT, Meta Platforms META and Alphabet GOOGL have the right combination of elements to post an earnings beat this reporting cycle.
Vertiv is anticipated to report third-quarter 2023 results on Oct 25. The company has a Zacks Rank #2 and an Earnings ESP of +1.82% at present. Vertiv’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, delivering an average surprise of 25.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VRT’s third-quarter earnings is pegged at 44 cents per share, indicating growth of 91.3% from the year-ago quarter’s level of 23 cents. The company’s quarterly revenues are estimated to increase 18.3% year over year to $1.75 billion.
Meta Platforms currently carries a Zacks Rank #3 and has an Earnings ESP of +1.24%. The company is slated to report third-quarter 2023 results on Oct 25. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the same on one occasion, delivering an average surprise of 19%.
The consensus estimate for Meta Platform’s third-quarter earnings is pinned at $3.57 per share, implying a year-over-year increase of 117.7%. The company is estimated to report revenues of $33.41 billion, up approximately 20.6% from the year-ago quarter’s level.
Alphabet carries a Zacks Rank #3 and has an Earnings ESP of +1.04% at present. The company is expected to report third-quarter 2023 results on Oct 24. Its earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the same in the other two, delivering an average surprise of 0.9%.
The Zacks Consensus Estimate for GOOGL’s third-quarter earnings is pegged at $1.45 per share, indicating a year-over-year improvement of 36.8%. The consensus mark for revenues is pegged at $63.2 billion, calling for a year-over-year improvement of 10.3%.
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