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India-based IT behemoth, Infosys Ltd. (INFY - Free Report) , is slated to report fourth-quarter fiscal 2017 results after the closing bell on Apr 12, 2017.

The company has had a mixed earnings history, having met estimates twice, with one beat and one miss in the trailing four quarters. Last quarter, Infosys beat estimates by 4.4%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Infosys’ efforts to shift its focus from “cost-based, people-only model” to software plus services model, has proved conducive to the company’s growth over the past few quarters. The company’s “Renew New” program, which lays the blueprint of its long-term growth, has helped it brave formidable headwinds in the past and is expected to benefit the upcoming fourth-quarter fiscal 2017 results.

As a matter of fact, two of its strategies—Zero Distance Program and AiKiDo (Artificial Intelligence, Knowledge-based IT and Design thinking) offerings—have proved major growth drivers in recent times. Overall, the Renew New strategy has helped the company reap multiple benefits, including renewal of traditional services, successful introduction of new ones and winning of deals.

In addition, lucrative contract wins and thriving business lines are expected to boost the company’s fiscal fourth-quarter 2017 results. During the third-quarter of fiscal 2017, the company added 77 clients, two being in the above-75 million revenue brackets. Solid performance across all its platforms—Finacle, Edge Verve, and Panay—proved conducive to growth. Such trends are expected to benefit the upcoming quarters as well.

Despite these positives, Infosys’ cautious outlook, as evident from two back to back guidance tweaks, implies limited chances of growth. Rapid proliferation of customizable internet-based software has been hampering Infosys’ traditional outsourcing business. The company may have to contend itself with precipitous decline in client spending that has plagued its financial results in the recent past. Most clients now prefer to seek service delivery through digital technology, thus adding to Infosys’ woes.

In addition to this, the new administration’s focus on on-shore business model, with more local hiring, have sent the Indian IT industry into a panic mode.  To make the most of changing times, majority of the companies including Infosys are reworking their existing policies, which are likely to impact the upcoming fourth-quarter margins adversely. Moreover, the constant strengthening of the Rupee against the U.S. dollar is also likely to act as a major spoilsport.

In fact, the company’s drab outlook is largely attributable to the currency headwinds. Concurrent with its third-quarter fiscal 2017 results, the company narrowed its guidance for revenue growth for this fiscal year to 8.4%–8.8% from the previous 8–9.0%, thus signaling bleak times ahead.

Earnings Whispers

Our proven model does not conclusively show that Infosys will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 24 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Infosys Limited Price and EPS Surprise

Infosys Limited Price and EPS Surprise | Infosys Limited Quote

Zacks Rank: Infosys’ Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult.

Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Applied Materials, Inc. (AMAT - Free Report) has an Earnings ESP of +1.32% and a Zacks Rank #1 (Strong Buy).

Motorola Solutions, Inc. (MSI - Free Report) has an Earnings ESP of +10.0% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CACI International Inc (CACI - Free Report) has an Earnings ESP of +1.37% and carries a Zacks Rank #2.

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