Infosys (INFY) Set to Report Q2 Earnings: Should Investors Bet on India?

Infosys INFY is set to report their fiscal 2020 second quarter results before the opening bell Friday. The IT giant’s shares have risen 17.2% in 2019 thus far, outpacing the software market’s 12.8% run. Wall Street has been uncertain about India as the country reported second quarter GDP growth of 5% this year, which marked its lowest gain in six years.

However, Infosys is coming off a first quarter that pleased Wall Street and sent their shares into the green in the aftermath of its report. Let’s take a look at the company and where they might be headed.

Company Overview 

The economic slowdown India experienced in the second quarter caused many banks like Goldman Sachs GS to lower their 2020 growth forecast for the country. Despite the economic pullback in Q2, India has been one of the fastest growing economies for years and surpassed China’s growth rate in the fourth quarter of 2017. The country aims to be a $5 trillion economy by 2024.

Infosys is based in India, and enables its clients to leverage its performance by utilizing its proprietary Global Delivery Model. Infosys markets its services to large enterprises in North America, Europe and the Asia Pacific region. The company provides consulting, information and technology services, and outsourcing for its clients.

Last quarter, Infosys brought in $3.13 billion in revenue, and their bottom line increased 3.2% Y/Y to $0.13 per share. The firm’s reported earnings came in on target with our Q1 estimate, and their reported sales surpassed our estimate by 1.06%. Digital revenues soared 39.3% to $1.12 billion, while core business revenues fell 0.8% to $2.01 billion in the quarter as well.

Outlook

Our Q2 consensus estimates project Infosys to see a bottom-line jump of 7.69% to 0.14 per share and for revenue to rally 9.65% to $3.2 billion. The financial services segment is projected to bring in 32% of the company’s revenue and the retail segment is expected to bring in 16%. Both the Communications and Energy, Utilities, Resources & Services segments are expected to contribute 13% and Manufacturing is expected to bring in 10%.

Looking ahead to full fiscal 2020, our consensus estimates predict that earnings will grow 1.85% to $0.55 per share and that its sales will hit $12.89 billion for a 9.22% leap. The company has an average EPS surprise of 1.92% over the past four quarters.

Infosys has a lot of potential in serving the needs of enterprise customers seeking to expand their technological capacity. Key areas such as cloud computing, data analytics, and interactions between customers and businesses are bringing the IT consultant a lot of business. Infosys is a solid bet to make for those feeling bullish about the general advancement of technology. Infosys is listed as a Zacks Rank #3 (Hold) and has been trading at a discount relative to the software market for the past year.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Infosys Limited (INFY) : Free Stock Analysis Report
 
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research