Infosys Q2 Earnings Beat on Deal Wins, Guidance Maintained
Infosys Technologies Ltd’s (INFY) second-quarter fiscal 2015 earnings per ADS from continuing operations came in at 89 cents, surpassing the Zacks Consensus Estimate of 84 cents by 6%. Earnings were also up 32.8% year over year and 6.0% sequentially. Profits during the quarter were primarily driven by large deal wins, along with cost-optimization efforts and strong focus on increasing productivity and utilization.
Quarter Details
During the quarter, total revenue came in at $2.2 billion, up 6.5% year over year and 3.9% sequentially on constant currency basis. Revenues were in-line with the Zacks Consensus Estimate. The company witnessed volume growth, client additions, significant deal wins and increased sales momentum in its big data and cloud offerings. In the second quarter of 2015, Infosys added 49 new clients in total and notable among them is the multi-year agreement with Daimler AG. Further, the company extended its strategic partnerships with Microsoft (MSFT), Oracle Corporation (ORCL), Hitachi Ltd. (HTHIY) and Huawei.
Moreover, in the second quarter, the company signed seven large deals of a total value of $600 million across the Americas, Europe and Rest of the World. While two out of the seven deals are related to financial services, the company has won one each in the fields of Retail, Manufacturing, Telecom, Life Sciences and Energy and Utility. Meanwhile, pricing, which has been a major issue till the recent past, has been more or less stable during the quarter.
Geographical Segment Performance
At the end of the reported quarter, Infosys reported strong sequential growth in geographic revenues. Revenues from North America improved 3.1% sequentially and 3.2% in constant currency basis. Europe reported an increase of 4.2% sequentially and 6.5% on constant currency basis. However, India declined 5.1% sequentially and 4.0%, on constant currency basis. However, Rest of the World reported revenue growth of 2.8% sequentially and 4.2% on constant currency basis.
Industry Segment Performance
Revenues in the Insurance, Banking and Financial services (FSI) segment grew 1.2% sequentially, while that in the Manufacturing segment (MFG) division improved 3.6%. Revenues at the Retail and Life Sciences (RCL) and Energy, Utilities, Communications & Services (:ECS) divisions rose 1.5% and 7.8% year over year, respectively.
Income
The company recorded operating profit of $575 million compared with $451 million in the prior-year quarter, reflecting an increase of 27.5%. Meanwhile, operating margin expanded 50 basis points year over year to 27% from 22% in the comparable prior-year quarter. Net profit after tax deductions stood at $511 million in the quarter, up 33.4% year over year.
Cash, Dividend, Bonus Issue
Infosys maintains a strong liquidity position with cash & cash equivalents of $4.6 billion as of Sep 30, 2014 as against $4.3 billion as of Mar 31, 2014.
The board of directors declared an interim dividend of INR 30 per share (equivalent to interim dividend of approximately 49 cents per ADS-exchange rate 61.00). The dividend is scheduled to be paid on Oct 17, 2014.
The board also approved a bonus of one share for every equity share held and a stock dividend of one American Depositary Share (ADS) for every ADS held. The date for the same is still under consideration.
Outlook
Management reiterated its outlook for fiscal 2015 projecting revenue increase in the range of 7% to 9%.
Infosys currently has a Zacks Rank #3 (Hold)
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