Infosys (INFY) Reports In-Line Q4 Earnings, Outlook Bleak
Zacks Investment Research | Apr 12, 2017 10:22PM ET
Despite contracted IT spending and anti-immigration rhetoric of President Donald Trump, IT and outsourcing services behemoth, Infosys Limited (NYSE:INFY) managed to meet earnings estimates in fourth-quarter fiscal 2017 results. The company reported earnings per American Depository Share (“ADS”) of 24 cents for the quarter, in line with the Zacks Consensus Estimate and up 4.3% on a year-over-year basis.
However, investors were disappointed by the company’s subdued outlook for the coming fiscal and its shares reflected the sentiment as they declined 4.7% in pre-market trading at one point.
The bottom line benefited from a modest top-line performance and diligent operational execution.
For fiscal 2017, Infosys reported earnings of 94 cents per ADS, up 4.4% over the prior fiscal.
Quarterly Details
Revenues increased 5% year over year to $2,569 million, but missed the Zacks Consensus Estimate of $2,586 million. Moreover, in terms of constant currency, revenues were up 5.3%.
Top-line growth was largely supported by lucrative contract wins, the Renew New strategy, growth in delivery services and lucrative client wins. During the reported quarter, the company added 71 clients, which also proved conducive to revenue growth.
For fiscal 2017, revenues came in at $10,208 million, up 7.4% over fiscal 2016.
Infosys’ operating profit inched up 1.5% year over year to $634 million. Management believes that strong focus on operational improvement helped maintain the company’s operating profits in the quarter.
Geographical & Industry-wise Performance
The company witnessed growth in three of the four regions where it operates. Fourth-quarter sales in North America, India and Rest of the World improved about 4.2%, 9.6% and 9.5% year over year, respectively. However, revenues from Europe declined 2.4% year over year.
Renew New Strategy Progresses Well
Infosys has been diligently following the “Renew New” program, which lays the blueprint of its long-term growth. Under the “Renew” initiative, the company introduced offerings in the areas of Digital, Cloud, Data Sciences, Mainframe Modernization, Cyber security, API Microservices and Internet of Things.
Currently, Infosys is witnessing impressive market demand for mainframe modernization across all verticals, and is working jointly with Amazon (NASDAQ:AMZN) Web Services and Azure, to help clients embrace cloud platforms. Under the “New” initiative, Infosys has been recording robust momentum in software and services.
Moreover, most of Infosys’ businesses, particularly EdgeVerve software products, continued to deliver sturdy performance in the quarter. The EdgeVerve business clinched 30 wins and 26 go-lives from both the Finacle and Edge suite of solutions in the reported quarter.
The company’s three distinguished offerings – Artificial Intelligence, Knowledge-based IT and Design Thinking – are proving to be key profit churners, helping to expand its market share.
Liquidity & Dividend
As of Mar 31, 2017, Infosys had cash & cash equivalents of $3,489 million, compared with $4,935 million recorded as of Mar 31, 2016.
For fiscal 2017, the company announced a final dividend of $0.23 per ADS.
Infosys Limited Price, Consensus and EPS Surprise
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