Infosys is India’s 2nd largest tech company and is also listed on the NYSE with the symbol INFY. The company’s revenues primarily come from the US and Europe with the company offering technology solutions and consulting.

The company will announce its earnings for its quarter ending on 20th June on 14th July at around 6.30 am EST after the markets close in India. This means the first reaction to the earnings would be witnessed in the stock’s listing in NYSE. 

Revenues and earnings estimates

As per Bloomberg consensus estimates, Infosys is expected to report $3.7 billion in revenues vs $3.6 billion the previous quarter. The company is also expected to expand its margin to 35.5% from 33.5% the previous quarter. Its EPS is expected to rise marginally to $01.68 from $0.164 in the previous quarter, Analysts also expect the company to revise its revenue growth guidance for FY22 upwards. While the current guidance points to a 12-14% growth, it might revise it up to 13-15% yoy.

The company earns 60% of its revenues from the US and 24% from Europe indicating a large revenue exposure outside India. So while India was reeling under a destructive 2nd wave of COVID-19, Infosys’s business might have been able to escape the consequences. In fact, the US and European economies have seen a pickup in their reopening momentum thanks to high vaccination rates. This is likely to act as a tailwind for Infosys.

The stock saw a strong rally in June as the price moved up by 13%. However since the start of July, the stock has faltered somewhat. The price has corrected by about 2.5% so far this month. From a positioning perspective this might augur well for the stock. Low market activity ahead of the earnings means that investors are not expecting too much from the results. So there is a potential for a major surprise that could translate into a big move in the price as well.

Infosys chart

Peer comparison

Infosys’s biggest rival is Tata Consultancy Services (TCS) which is the largest tech company in India. Infosys has a market capitalization of $88 billion while TCS has a market capitalization of $160 billion. TCS announced its results on 8th July and its earnings missed the estimates marginally. The stock closed 1.5% lower after the earnings. 

Both these companies have a strong correlation and TCS’s earnings are typically a good indicator of the earnings for the rest of the Indian tech companies. Hence there is a low chance that Infosys earnings will beat the estimates by a large extent.

On the valuation front, Infosys trades at a 28 price-to-earnings ratio as compared to 29 for TCS. Infosys’s P/E is much higher than the rest of the Indian tech companies which means that the company is trading at an expensive multiple.

Ongoing buyback

The stock also has an ongoing open market buyback. The buyback commenced on 25th June and the company is expected to buy back 52 million shares which represent 1.2% of the total outstanding shares. The ceiling price for the buyback is INR 1750 which is at a 10% premium to the current market price. 

The company has undertaken two buybacks prior to this. In both of them, the share price outperformed the market and sector benchmark. Presently, the process is paused due to the blackout period ahead of the earnings. However, once it resumes post-earnings announcement, the stock price can expect support. Infosys has bought back nearly 20% of the total number of shares planned, so 80% still remains, and it will keep fueling up the demand for the stock.