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Infosys (INFY) Q2 Earnings Miss Mark, Revenues Top, Up Y/Y
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Infosys' (INFY - Free Report) second-quarter fiscal 2020 adjusted earnings of 13 cents per share inched up 0.2% year over year. However, the metric fell a penny short of the Zacks Consensus Estimate.
Meanwhile, revenues of $3.210 billion increased 9.9% year over year and also surpassed the Zacks Consensus Estimate of $3.203 billion. In terms of constant currency (CC), the same was up 11.4% as well.
Rise in large deal wins and fast-growing digital services remain key catalysts. Strong demand for its services in cloud, IoT, cyber security, data and analytics is a key driver. The company recorded double-digit growth in six of its seven business segments. Robust growth in Europe and the United States was also a tailwind.
Quarterly Details
Digital Revenues (38.3% of total) surged 36% year over year (38.4% at cc) to $1.23 billion while Core Revenues (61.7%) declined 18% (up 0.7% at cc) to $1.98 billion.
Geographically, North America and Europe revenues rose 11.9% and 14.6%, respectively, at cc. Rest of the World and India increased 1.91% and 17.9% each.
Segment wise, Communication achieved maximum growth of 19.2%. Energy, Utilities, Resources & Services, Hi Tech, Manufacturing, Life Sciences and Financial Services rose 19.1%, 11.7%, 16.9%, 10.9% and 10.3%, respectively. Retail recorded growth of 1.1%.
In the quarter under review, the company added 96 clients. It also inked 13 large deals with a total contract value (TCV) of $2.85 billion. Four of these were in Financial Services and Retail, two in Communications and one each in Energy, Utilities, Resources and Services plus Hi-Tech and Life Sciences segment. Geographically, six were from America, five from Europe and two from Rest of the World.
The company reported that its clients worth more than $100 million now add up to 27 compared with 23 a year ago.
Long-term earnings growth rate for Synopsys, Alteryx and Five9 is currently projected to be 12%, 17.6% and 10%, respectively.
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Infosys (INFY) Q2 Earnings Miss Mark, Revenues Top, Up Y/Y
Infosys' (INFY - Free Report) second-quarter fiscal 2020 adjusted earnings of 13 cents per share inched up 0.2% year over year. However, the metric fell a penny short of the Zacks Consensus Estimate.
Meanwhile, revenues of $3.210 billion increased 9.9% year over year and also surpassed the Zacks Consensus Estimate of $3.203 billion. In terms of constant currency (CC), the same was up 11.4% as well.
Rise in large deal wins and fast-growing digital services remain key catalysts. Strong demand for its services in cloud, IoT, cyber security, data and analytics is a key driver. The company recorded double-digit growth in six of its seven business segments. Robust growth in Europe and the United States was also a tailwind.
Quarterly Details
Digital Revenues (38.3% of total) surged 36% year over year (38.4% at cc) to $1.23 billion while Core Revenues (61.7%) declined 18% (up 0.7% at cc) to $1.98 billion.
Geographically, North America and Europe revenues rose 11.9% and 14.6%, respectively, at cc. Rest of the World and India increased 1.91% and 17.9% each.
Segment wise, Communication achieved maximum growth of 19.2%. Energy, Utilities, Resources & Services, Hi Tech, Manufacturing, Life Sciences and Financial Services rose 19.1%, 11.7%, 16.9%, 10.9% and 10.3%, respectively. Retail recorded growth of 1.1%.
In the quarter under review, the company added 96 clients. It also inked 13 large deals with a total contract value (TCV) of $2.85 billion. Four of these were in Financial Services and Retail, two in Communications and one each in Energy, Utilities, Resources and Services plus Hi-Tech and Life Sciences segment. Geographically, six were from America, five from Europe and two from Rest of the World.
The company reported that its clients worth more than $100 million now add up to 27 compared with 23 a year ago.
Infosys Limited Price, Consensus and EPS Surprise
Infosys Limited price-consensus-eps-surprise-chart | Infosys Limited Quote
Margin
Gross profit rose 3.2% year over year to $1.07 billion. Gross margin shrank nearly 220 basis points (bps) on a year-over-year basis to 33.3%.
The company’s operating income grew 0.6% year over year to $696 million. Operating margin shriveled 200 bps to 21.7%.
Increases in utilization, onsite mix, employee pyramid improvement and other cost efficiencies were positive.
Liquidity
As of Sep 30, 2019, Infosys had cash and cash equivalents of $2,324 million compared with $2,666 million sequentially.
Operating cash flow in the quarter under discussion was $522 million while free cash flow was $397 million.
Outlook
In fiscal 2020, revenues are expected to grow in the 9-10% at cc, indicating a rise from 8.5-10% predicted earlier.
Operating margin is still anticipated between 21% and 23%.
Zacks Rank and Stocks to Consider
Currently, Infosys has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Synopsys (SNPS - Free Report) , Alteryx and Five9 (FIVN - Free Report) , each flaunting 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 Synopsys, Alteryx and Five9 is currently projected to be 12%, 17.6% and 10%, respectively.
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The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.
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