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Infosys (INFY) Gains 4% as Q3 Earnings & Revenues Beat Estimates

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Infosys Limited (INFY - Free Report) shares closed 4% higher on Thursday after the India-based IT consulting and outsourcing company reported better-than-expected results for the third quarter of fiscal 2024. The company reported earnings of 18 cents per share, a penny higher than the Zacks Consensus Estimate. However, the bottom line came a penny lower than the year-ago quarter’s earnings of 19 cents per share.

Infosys’ fiscal third-quarter revenues were flat year over year at $4.66 billion but surpassed the consensus mark of $4.58 billion. In terms of constant currency (cc), the metric was down 1%.

The company’s better-than-expected third-quarter performance reflects the benefits of strong sales executions and improved operational efficiencies achieved under the ongoing “Project Maximus” program despite the challenging environment.

Shares of Infosys have underperformed the Zacks Computer and Technology sector in the trailing 12 months. While INFY stock has increased 3.8% over the past one year, the Computer and Technology sector has rallied 46.7%.

Infosys Limited Price, Consensus and EPS Surprise American Noble Gas Inc. Price, Consensus and EPS Surprise

Infosys Limited price-consensus-eps-surprise-chart | Infosys Limited Quote

Top-Line Details

Revenues across Europe and the Rest of the World recorded a year-over-year increase of 9.2% and 7.1%, respectively, on a reported basis. However, North America and India regions registered a decline of 4.7% and 1.9%, respectively.

Segment-wise, revenues from Manufacturing increased 12.5% to $694.8 million, Life Sciences revenues grew 8.2% to $354.4 million, Retail sales grew 2% to $680.8 million, and Energy, Utilities, Resources & Services sales increased 1.8% to $615.5 million. In the second quarter of fiscal 2024, the company’s Retail segment revenues grew 2% to $680.8 million, while the Others business unit’s revenues increased 5.8% to $135.2 million.

However, Financial Services fell 5.2% to $1.3 billion, and Communication declined 7.3% to $531.6 million. The Hi-Tech division’s sales dropped 5% to $359.1 million.

Infosys added 88 clients in the fiscal third quarter. It signed multiple large deals of contract values worth $3.2 billion. The company reported that its clients, worth more than $100 million, now add up to 40 and were up from the year-ago quarter’s tally of 38 as well as from the second-quarter fiscal 2024’s 39.

Other Financial Details

Gross profits decreased 2.8% year over year to $1.39 billion. The gross margin contracted 90 basis points (bps) on a year-over-year basis to 29.8%.

The company’s operating income declined 4.5% year over year to $956 million. Meanwhile, the operating margin contracted 100 bps to 20.5% year over year.

Infosys ended the fiscal third quarter with consolidated cash and investments of $3.9 billion, down from the $4.17 billion recorded at the end of the second quarter of fiscal 2024. During the third quarter and the first nine months of fiscal 2024, the company generated free cash flow of $665 million and $2.03 billion, respectively.

Updated FY24 Outlook

Infosys tightened its fiscal 2024 revenue growth guidance to 1.5%-2% at cc from 1%-2.5% projected earlier. However, the company continues to estimate an operating margin in the 20-22% range for the full fiscal.

Zacks Rank & Stocks to Consider

Currently, Infosys carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader technology sector are Zoom Video Communications Inc. (ZM - Free Report) , NVIDIA Corporation (NVDA - Free Report) and Salesforce, Inc. (CRM - Free Report) . While Zoom sports a Zacks Rank #1 (Strong Buy), NVIDIA and Salesforce each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Zoom’s fiscal 2024 earnings has been revised upward by 28 cents to $4.94 per share in the past 60 days, suggesting year-over-year growth of 13%. The long-term estimated earnings growth rate for the stock stands at 33.5%. Shares of ZM have declined 2.2% over the past year.

The consensus mark for NVIDIA’s fiscal 2024 earnings has been revised upward by 2 cents to $12.31 per share over the past 30 days, indicating a whopping 269% increase from fiscal 2023. It has a long-term earnings growth expectation of 13.5%. In the trailing 12 months, NVDA stock has surged 242.7%.

The Zacks Consensus Estimate for Salesforce’s fiscal 2024 earnings has been revised upward by a penny to $8.20 per share in the past 30 days, which calls for an increase of 56.5% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 21.5%. CRM stock has returned 87.1% over the past year.

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