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Infosys shares up on forecast

The Associated Press

The U.S.-traded shares of Indian outsourcing company Infosys Ltd jumped Friday after the company posted a better-than-expected quarter and raised its annual revenue forecast.

THE SPARK: Infosys on Friday reported earnings per American depositary share of 76 cents, down from 80 cents a year earlier. Analysts were expecting 73 cents a share in the latest quarter, according to FactSet. Quarterly revenue rose 6 percent to $1.91 billion, beating market expectations of $1.86 billion.

The company also raised its revenue forecast for its fiscal year ending March 31 to $7.45 billion from $7.3 billion, and above the average forecast of $7.35 billion. It expects earnings per ADS of $2.97, matching expectations.

THE BIG PICTURE: Infosys has long been considered a bellwether company for India's outsourcing industry.

The company said it added roughly 50 new clients during the quarter. It has won eight business and information technology deals — four of them in the U.S., three in Europe and one in India. The company also recently completed an acquisition and said it is seeing some stability in pricing.

CEO S.D. Shibulal said that clients believe the worst is over but the economic uncertainty is weighing on business planning.

"The world has not changed in the last 90 days," he told investors on a conference call. "The environment continues to be volatile. Our clients operate in a volatile environment and that reduces their ability to take long-term investment decisions. It also occasionally creates ramp-downs as well as slowness in ramping up growth opportunities."

THE ANALYSIS: Janney Capital Markets analyst Joseph Foresi said while he expects that any good news would be well-received by investors, there are still challenges for the company.

"One quarter does not make a trend on the execution side," the analyst wrote in a research note.

He said that there are still questions about the company's ability to sustain its margin structure, trends in demand and its market share. He maintained a "Neutral" rating.

SHARE ACTION: U.S.-traded shares in Infosys Ltd. jumped $8.79, or 20 percent, to $52.74 in afternoon trading.