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Infosys (INFY) Q4 Earnings: What's in Store for the Stock?

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Infosys Limited (INFY - Free Report) is set to report fourth-quarter fiscal 2019 results on Apr 12.

The company’searnings beat the Zacks Consensus Estimate in three of the trailing four quarters and matched it once, the average positive surprise being 4.92%.

In the last reported quarter, the company’s earnings of 14 cents per share topped the Zacks Consensus Estimate by a penny.

Revenues of $2.99 billion increased 8.4% year over year and surpassed the Zacks Consensus Estimate of $2.95 billion. In terms of constant currency (CC), revenues were up 10.1%.

Let’s see, how things are shaping up for the upcoming announcement.

Factors at Play

Infosys’ focus on Agile Digital and AI-driven Core services is a tailwind. The company is benefiting from growth across geographies and business segments.

Higher spending on digital, analytics, cloud, cybersecurity and other new technology domains is a key driver for the company. It is gaining traction from a strong performance within its banking, financial services and insurance (BFSI) verticals.

Large deal wins are a positive for the company. In the fiscal third quarter, it signed 14 big contracts with a total contract value (TCV) of more than $1.57 billion, mainly from financial services and manufacturing verticals. The company added 101 clients to its portfolio, partly backed by the Fluido acquisition. Higher investment in sales and steadfast focus on building a client-supportive portfolio are an upside.

However, weaknesses in the European financial market are an overhang on the company. Besides, an unfavorable foreign exchange movement is a persistent headwind.

Additionally, a hostile political climate in the United States and difficulties in adapting to the changing political climate in the region are a direct threat to the company’s economical cost structure, which focuses on using its workforce on the sites located abroad.

On the company’s last earnings call, management added that the operating margin in the fiscal fourth quarter is likely to be impacted by “rupee appreciation, targeted communication correction, continued investment in business and initial margin impact to transition and impact of recently won deals.”

Infosys Limited Price and EPS Surprise

Infosys Limited Price and EPS Surprise | Infosys Limited Quote

What Our Model Says

Our proven Zacks model shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Infosys has a Zacks Rank #3, which increases the predictive power of ESP, but its Earnings ESP of 0.00% in the combination makes surprise prediction difficult for the stock in the upcoming release.

Stocks to Consider

Here are some stocks that are worth considering as our model shows that these have the right combination of elements to beat on earnings this reporting cycle:

Acacia Communications, Inc. has an Earnings ESP of +5.73% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Akamai Technologies, Inc. (AKAM - Free Report) has an Earnings ESP of +5.16% and a Zacks Rank of 2.

Gogo Inc. (GOGO - Free Report) has an Earnings ESP of +7.99% and is a Zacks #2 Ranked stock.

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