Infosys to report Q3 earnings today — Here’s what to expect

What to expect for Infosys' earnings for Q3FY20IANS

  • Infosys will share its third-quarter earnings on January 10.
  • The quarter is seasonally weak for IT companies and Infosys is unable to buck the trend.
  • Analysts predict average growth and relatively flat margins.
  • Key announcements to watch out for are updates around Infosys’ whistleblower allegations and revision of revenue guidance.
The third quarter is seasonally weak for IT companies — and Infosys is no exception. Outlook for the Indian IT giant is average with the Euro bank crisis still weighed down by weaker spending by banking, financial services and insurance (BFSI) clients.


Furthermore, stress from weakness in the US capital market as tensions with Iran continue to rise — coupled with volatility in retail — doesn’t help matters. While the stronger dollar will help margin, escalating conflict may force clients to further cut back on spending.

Investors are also hoping that the company will share developments around the whistleblower allegations — one of the few reasons that the company has been an underperformer in the stock market this quarter, compared to its peers.

CompanyGain/Loss
Infosys-8.4%
TCS11.6%
Wipro7.15%
HCL Tech11.46%
Tech Mahindra8.19%


The street is also expecting Infosys to raise its guidance from 9-10% to 9.5-10.5%. The company has been cautiously increasing the projected growth which was at 7.5-9.5% at the beginning of the year.

However, energy and utilities, as well as hi-tech — which includes big data analytics and Industrial Internet of Things (IIoT) tools — may offset the drag from BFSI this quarter.


Narnolia’s analyst, Niharika Ojha predicts that the company will post quarterly growth of around 1.9%. "BFSI is expected to remain a bit slow as compared to last quarter’s growth mainly owing to weakness in European banks and some weakness in the capital market where the company operates. However insurance will continue to support the growth in Q3FY 20," states Narnolia’s report.

However, Harit Shah from India Nivesh forecasts that Infosys may even hit 2.5% while HDFC Securities expects a moderate 1.3% growth.

Any benefit to earnings before interest and tax (EBIT) margins will be due to currency benefits, which will help increase the company’s profitability. However, HDFC Securities believes that those gains will be offset by furloughs and title-holder wage increases.

"Strong cost take out program and front-ended investments will support margin stability. Factored margins and mid-point of the guided band," says the report.


In addition to any updates of the whistleblower allegations, follow up on large deal wins in the last quarter and how the company will manage the weakening BFSI segment are factors to watch out for.

See also:
HCL Tech and Tech Mahindra may post better earnings as Euro bank crisis affects Infosys, Wipro

Here’s how Infosys and TCS earnings performance in Q2 2020 stack up against each other

Infosys will have to answer tough questions from market regulators — like a suspicious bearish bet
{{}}
Add Comment()
Comments ()
X
Sort By:
Be the first one to comment.
We have sent you a verification email. This comment will be published once verification is done.