Infosys Technologies is expected to beat its earlier revenue guidance for the fourth quarter (January-March), which is usually a weak quarter for most tech companies, and guide to an 18-20% revenue growth in dollar terms in 2011-12 (April-March).
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Analysts say higher discretionary spending and improved demand environment will lead to strongearnings growth for Infosys and other software services providers in 2011-12.
“Discretionary spending has increased and the demand environment is also good. I-T budgets are 2-3% higher this year and many companies are looking at more outsourcing, which augurs well for Infosys and its peers,” Srishti Anand of Angel Broking said.
The technology bellwether has forecast fourthquarter revenue of USD 1.60-62 billion, up 23.5-24.8% from a year ago, while rupee revenue is seen in the Rs 7,517-7,230 crore range, up 20.4-21.6%.
However, analysts say the company’s guidance has always been conservative and the street wouldn’t be surprised if it outperforms in the fourth quarter as well as 2011-12 fiscal.
Most analysts expect a 3-4% quarter-on-quarter revenue growth in the fourth quarter, while the company’s guidance pegs sequential turnover growth of maximum 2%, due to the seasonality.
“While the fourth quarter is a seasonally weak quarter and we expect quarter-on-quarter revenue growth to be the lowest of 2010-11, we see Infosys beating its revenue guidance of 2% quarter-on-quarter,” according to IIFL Institutional Equities.
For the 2011-12 fiscal too analysts expect the company’s actual revenue growth would be higher than the 18-20% it is likely to forecast.
“Infosys has history of providing conservative guidance, consensus and we already bake in 25% dollar revenue growth and our fiscal 2012 earnings per share estimateis about Rs 150,” Viju George of brokerage house JP Morgan said in a report.
JP Morgan expects Infosys Technologies to forecast earnings per share of Rs 139-141 for 2011-12.
Infosys has had a history of outperforming its guidance. Since 2002, except in 2008, every year the company’s revenue and earnings per share growth has been higher than it had forecast. For instance, its revenue growth in 2009-10 was 1.1% higher than its forecast, while it outperformed its earnings per share guidance by 10.2%.
Analysts say Infosys’ guidance for 2011-12 is likely to be a non-event given that analysts have already factored in a higher growth than what it is likely to forecast.
Infosys Technologies shares are down almost 6% since the beginning of 2011, compared with National Stock Exchange’s CNX IT Index, which is down 4.5%.
Angel’s Anand expects 10-11% upside in Infosys shares from the current levels. She has a “accumulate” rating on Infosys, with a target price of Rs 3,629 a share.
Edelweiss Capital has a “hold” and JP Morgan has a “neutral” rating on the stock.
At 12:20 hrs Infosys Technologies shares were traded at Rs 3,267.90 on NSE, up 0.8/%.
DEEPAK KUMAR
PGDM
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