Posted on Tuesday, July 12th, 2011 | In Current Market News, Stocks to Watch
Infosys Technologies Limited (INFY) reported first quarter 2012 earnings per ADS from continuing operations of 67 cents, which surpassed the Zacks Consensus Estimate of 64 cents. Earnings declined 4.3% sequentially but grew 17.5% year over year, led by growth in all areas and across the customer base.
Total revenue for the quarter was $1.6 billion, representing a year-over-year growth of 23.0%. The company saw growth in retail and manufacturing and also in banking, insurance and financial services.
Apart from signing some big deals, during the first quarter of 2012, Infosys launched the Health Benefit Exchange solution. This solution is not only cost effective but also allows payers to market the plan more effectively, simultaneously allowing them to get fast and personalized quotes.
The company recorded an operating profit of $435 million compared with $384 million in the prior-year period. Net income after tax was $384 million, up 17.8% year over year.
Infosys maintains a strong liquidity position with cash & cash equivalents, including investments in available-for-sale financial assets and certificates of deposits, amounting to $3.8 billion at the end of the quarter.
For the quarter ending September 30, 2011, Infosys expects revenues to be in the range of $1.70 billion to $1.755 million, up 15.6% to 17.3% year over year. Earnings per ADS are expected to be in the range of 67 cents to 68 cents, up 3.1% to 4.6% from the year-ago quarter.
For fiscal year ending March 31, 2012, revenues are expected to be in the range of $7.13 billion to $7.25 billion, up 18.0% to 20.0%. Earnings per ADS are expected to be in the range of $2.88 to $2.92.
The Indian offshore IT services market has seen tremendous growth over the past five years, and there are reasons to believe that this growth will continue in the foreseeable future. A vast pool of talented labor, a sizeable Anglophone population and a competitive cost structure characterize this market. Additionally, the Indian offshore services market only accounts for a small percentage of worldwide IT services spending, leaving room for Infosys to grow.
However, revenues of Infosys are highly dependent on clients primarily located in the United States and Europe, as well as clients concentrated in certain industries. The soft economy or factors that impact the economic health of the United States, Europe or these industries may affect its business.
Intense competition in the market for technology services could affect Infosys' cost advantages, which might reduce its share of business from clients and decrease its revenues.
Founded in 1981, Infosys Technologies Ltd. is the second-largest IT services company in terms of revenue in India. Headquartered in Bangalore, India, the company enables its clients to improve their performance through its proprietary Global Delivery Model (GDM). Major competitors of Infosys are Tata Consultancy Services Limited and Wipro Technologies, the global IT services business division of Wipro Limited (WIT).
We currently have a Zacks #4 Rank (short-term Sell recommendation) over the next one-to-three months.
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