Infosys Technologies Ltd (INFY) reported third quarter fiscal 2014 earnings per ADS from continuing operations of 81 cents, surpassing the Zacks Consensus Estimate of 75 cents by 8.0%. Quarterly earnings were up 6.6% year over year and 20.9% sequentially. Profits during the quarter were primarily driven by the company’s differentiating strategy to capture potential opportunities and strategic organizational changes.
Quarter Details
During the quarter, total revenue generated was $2.1 billion, up 9.9% year over year and 1.7% sequentially. The company witnessed volume growth, client additions, five large deal wins and increased sales momentum in its big data and cloud offerings. Revenues also exceeded the Zacks Consensus Estimate of $20.8 billion.
The company added a total of 54 clients and also formed partnerships with clients to create innovative solutions across the mobile device. During the quarter, Infosys formed 25 such partnerships across the mobile field.
Infosys continues to strengthen its expertise and competency in Oracle Corp. (ORCL). During the reported quarter, Gartner’s International Retail Core Banking report placed Infosys ‘Finacle’ as the Leader in its Magic Quadrant for International Retail Core Banking for the seventh time consecutively.
This apart, during the quarter, the company announced some major appointments of directors for the company. The Board of Directors appointed Mr. U B Pravin Rao as an Additional and Whole-time Director and Ms. Kiran Mazumdar-Shaw as an Additional (Independent) Director.
Revenue by Geographical Segment
During the reported quarter, Infosys reported strong year-over-year growth in geographic revenues. 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.
Revenues by Industry Segment
Revenues in the Insurance, Banking and Financial services (IBFS) grew 33.5% while the Manufacturing segment (MFG) revenues grew 22.8%. Revenues from the Retail and Life Sciences division (RCL) grew 24.6% while revenues in Energy, Utilities, Communications & Services (ECS) grew 19.1% year over year.
Income
The company recorded an operating profit of $526 million compared to $491 million in the prior-year quarter, reflecting an increase of 7.1% year over year. However, the operating margin contracted 65 basis points year over year to 25.0% from 25.6% in the comparable prior-year quarter. The decline in margin was largely due to the currency volatility.
Net profit after tax was $463 million for the quarter, up 6.7% year over year and 20.9% sequentially.
Cash
Infosys maintains a strong liquidity position, had cash & cash equivalents of $4.4 billion as of Dec 31, 2013 compared to $4.3 billion as of Sep 30, 2013.
Outlook
Concurrent with the earnings release, management revised its revenue outlook for fiscal 2014. Revenues are expected to increase in the range of 11.5% to 12.0%, against 9% to 10% mentioned earlier.
Infosys currently has a Zacks Rank #2 (Buy). However, investors interested in the IT sector can also consider stocks such as EPAM Systems, Inc. (EPAM) and Progressive Software Solutions, Inc. (PRGS). Both have a Zacks Rank #2 (Buy).
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