Will Infosys cheer the markets on Friday?

 

Infosys was once the IT bellwether. reporting its quarterly results before its rivals and guiding of how things were likely to shape up for the entire industry. Its still reports ahead of its peers, but its no more the benchmark. A string of poor results over the last many quarters had raised many questions.

The company reported good results in the April-June quarter. And investors will be hoping the arrival of Narayana Murthy back at its helm, continued recovery in the US market (its biggest revenue geography) and the rupee depreciation will help the company report another good performance in the July-September quarter.

But, there have also been several top executive exits, Ashok Vemuri, the head of Americas, for instance. Vemuri is now the CEO of US-based IGate Corp. Similarly, Infosys’ global sales head Basab Pradhan too put in his papers earlier.

With the founder Narayana Murthy at the head and his son Rohan Murty likely to be named Vice President, investors will hoping for a smooth drive ahead.

Here’s a snapshot of what analysts are expecting from Infosys when it announces its Q2 results on Friday.

Dollar revenues could grow 2.6 percent quarter-on-quarter to USD 2,043 million led by timely ramp ups in large deals while rupee revenues could grow 12.6 percent sequentially. EBIT margins may improve 61bps led by rupee tailwinds but offset by wage hikes – ICICI Direct.

Sequential Dollar revenue growth could be 3.0-3.5 percent, which would be largely volume driven. Pricing is expected to remain flat. The revenue growth would be led by timely ramp ups in large deals. In Rupee terms, revenue growth is likely to be higher at 14.0-14.5 percent on the back of an average 11 percent depreciation in the Rupee. Infosys could raise its US Dollar revenue guidance to 9-12 percent from 6-10 percent due to improvement in demand. The Rupee EPS guidance is also likely to be raised, helped by currency tailwinds – HDFC Securities.

Expect Infosys to give a modest second half outlook. Its commentary on better margins in H2 could lead to EPS upgrades for the street – Morgan Stanley.

Sequentially, we expect 2 percent Dollar revenue growth. Infosys indicated 300 bps headwinds due to wage hikes, which would be offset by the currency benefits. So expect margins to be flattish – Citigroup.

Watch out for the Bangalore-based company’s margins in the second quarter, management commentary on the overall demand environment and its guidance for the rest of the year. Any update on Rohan Murty’s future role will also be closely watched.