Brokerages Expect Infosys Stock to Trade Lower in the Months to Come

Vishal Sikka, chief executive officer of Infosys (Photographer: Namas Bhojani/Bloomberg)

Brokerages turned cautious on Infosys Ltd., after the software services provider reported weak quarterly earnings and cut its annual sales forecast.

Revenue grew 1.4 percent in the three months ended June, compared to the previous quarter, the company said in its filing to the exchanges. Margins fell 140 basis points to 24.1 percent. Both numbers were below the average of analyst estimates compiled by Bloomberg. The company cut its sales forecast in U.S. dollar terms to 10.8-12.3 percent for the financial year 2016-17, down from a previous guidance of 11.8-13.8 percent.

Brokerage firm Nomura warned that even the reduced guidance may be optimistic, while others including Kotak Securities and IDFC Securities said they expect earnings downgrades going forward.

Here's a snapshot of what brokerages had to say on Infosys' earnings and outlook.

Kotak Securities

Material miss and disappointment.
Results far weaker than estimates.
Expect earnings per share downgrades and stock to trade lower.

Nomura

Constant currency growth of 1.7 percent is a big miss.
Infosys will find it difficult to meet dollar growth guidance. Company will need to post compounded quarterly growth rate of 3.4 to 4.3 percent, which looks optimistic.
May see earnings cuts.

IDFC Securities

Expect earnings downgrades.
Expect the stock to trade with negative bias on account of the weak quarterly performance.
Expect consensus downgrade of 8-10 percent for current and next financial years.

Also read: Infosys Cuts FY17 Guidance; Stock Slumps 10%