Infosys Limited (INFY - Free Report) has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering an average positive surprise of 3.1%.
With expected long-term earnings per share growth rate of 9.2% and a market cap of $40.7 billion, it seems to be a stock that investors’ should retain their portfolio for now.
Let’s take a look at the factors aiding the company’s performance.
Lucrative client wins and impressive performance of new high growth services and software business bode well for the company. A strong multi-industrial pipeline is also a positive.
Infosys’ investments in new services, particularly in Cloud Ecosystem, Big Data and Analytics, API and Micro services, Data and Mainframe Modernization, Cyber Security and IoT Engineering Services have been showing promising results.
The company’s fourth-quarter fiscal 2018 earnings and revenues came in better than expected and also increased year over year.
Notably, the company announced compensation revision of around 85% of its workforce effective Apr 1, with a higher variable pay and incentives. This initiative has dragged down quarterly margins a bit.
Additionally, increasing anti-outsourcing sentiment in certain countries, including the United States and the United Kingdom, is likely to lead to the enactment of restrictive legislations. This might in turn impact the company’s financials as companies in these parts of the world could stop outsourcing work to Infosys.
Moreover, given the changing political climate in the United States, Infosys’ focus on on-shore business model, with increased local hiring, is likely to hurt the company’s profitability.
Nevertheless, Infosys is benefiting from renewal of traditional services and rollout of services in areas such as Cloud Ecosystem, Big Data and Analytics. This paves the way for future growth of this Zacks #3 (Hold) stock and justifies its retention in investors’ portfolio.
Stocks to Consider
Some better-ranked technology stocks include NVIDIA Corp. (NVDA - Free Report) , Western Digital Corp. (WDC - Free Report) and Micron Technology, Inc. (MU - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for NVIDIA, Western Digital and Micron is currently projected to be 10.25%, 19% and 10%, respectively.
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