On Jan 17, we upgraded Infosys Ltd. (INFY) to Outperform from Neutral driven by its impressive third-quarter fiscal 2014 results. The Information Technology service provider sports a Zacks Rank #2 (Buy).
Why the Upgrade?
On Jan 10, Infosys reported third-quarter fiscal 2014 earnings per ADS from continuing operations of 81 cents per share, surpassing the Zacks Consensus Estimate of 75 cents by 8.0%. Quarterly earnings were up 6.6% year over year. Over the past four quarters, Infosys has delivered an average surprise of 5.9%.
The outperformance was driven by the company’s differentiating strategy to capture potential opportunities and strategic organizational changes.
Infosys also reported strong year-over-year growth in revenues from different geographic regions. Revenues from North America grew 60.0% followed by Europe, where revenues increased 24.9%. Coming next in the line is Rest of World with revenue growth of 12.5% followed by India with 2.6% growth.
Following the release of third-quarter results, the Zacks Consensus Estimate for fiscal 2014 increased 1.0% to $3.01 per share. Moreover, the Zacks Consensus Estimate for fiscal 2015 also increased by 1.4% to $3.37 per share.
Additionally, Infosys has a strong balance sheet, a substantial cash flow and no debt. In the last quarter, the company also reported higher revenues across all its businesses. Furthermore, positive estimate revisions, volume growth, client additions, five large deal wins and increased sales momentum in its big data and cloud offerings are some of the catalysts driving the stock.
Following the earnings release, the management also updated the guidance for fiscal 2014. Revenues are expected to increase in the range of 11.5% to 12.0%, against 9% to 10% guided earlier. The revenue as per the Zacks Consensus Estimate is currently pegged at $8.3 billion for fiscal 2014.
Other Stocks to Consider
Some other stocks with the same Zacks Rank are Amdocs Ltd (DOX), Camelot Information Systems Inc. (CIS) and GTT Communications, Inc. (GTT).
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