Infosys Ltd. (INFY), a leading provider of business consulting, technology, engineering and outsourcing services, is set to report third-quarter fiscal 2015 results on Jan 9. The company has delivered positive earnings surprise in all of the trailing four quarters with an average beat of 8.3%. Let us see how things are shaping up for this announcement.
Factors Influencing this Quarter
Infosys’ expertise and core competence in consulting, IT services and business process management, backed by the company’s Global Delivery Model, acts as its key growth driver. This apart, the company has been benefiting from its big ticket deals and strategic collaborations.
In the last reported quarter, the company signed seven large deals with a total value of $600 million across the Americas, Europe and Rest of the World. Thereafter, the company has formed various collaborations with diverse entities like DreamWorks Animation, Tableau Software Partner and Stanford Graduate School of Business to drive growth. Infosys has also been focused on developing its operations on the international front. Encouragingly, last month the company declared a stock split in 2:1 ratio.
However, the company’s high attrition rates, coming in the wake of severe competition in the industry and adverse currency translations, remain a concern.
Earnings Whispers?
Our proven model does not conclusively show that Infosys will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: The earning ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 43 cents.
Zacks Rank: Infosys has a Zacks Rank #3 (Hold) but we need to have a positive ESP as well to be confident about an earnings surprise.
We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Arch Capital Group Ltd. (ACGL) with an Earnings ESP of +12.37% and a Zacks Rank #1 (Strong Buy).
Quest Diagnostics Inc. (DGX) with an Earnings ESP of +20.76% and a Zacks Rank #1.
Alcoa Inc. (AA) with an Earnings ESP of +15.39% and a Zacks Rank #2 (Buy).
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