For its first quarter of 2016, Infosys Ltd ADR (NYSE:INFY) earned $0.23 per share on revenues of $2.39 billion, beating earnings expectations by $0.01 per share and revenue expectations by $50 million. Gross margin fell 0.7% year-over-year to 37.8% while operating expenses increased 8% to $294 million. Guidance was a little bit weaker than expected, as the company trimmed its revenue growth projections for fiscal year 2016 to 6.4%-8.4% from 7.2%-9.2% because of the strong dollar. Nevertheless, the earnings report wasn’t as bad as the market sell-off implied. U. B. Pravin Rao said:
We had strong all-round growth during the quarter driven by recent initiatives around service differentiation, improvement in client mining and higher focus on winning large deals. Increase in revenue productivity was significant, volume growth was robust, client metrics and utilization improved while attrition remained stable.
Shares of Infosys are up 13.6% year to date and trade at a forward PE of 19.4 versus the NASDAQ’s forward PE of 17.75. Given that outsourcing is a secular trend, Infosys’ above average growth won’t go away, although there is limited upside until the dollar weakens against the Rupee or the company grows faster than expectations again.
Our data shows the elite funds we track are ambivalent on Infosys Ltd ADR (NYSE:INFY) as only 17 funds reported stakes worth 2% of the float ($718.4 million) in the second quarter. Ken Fisher‘s Fisher Asset Management owns 21.67 million shares while Cliff Asness’ AQR Capital management owns 11.89 miillion shares.
Analysts are divided on the stock. Five analysts have ‘Hold’ ratings while just two have ‘Buy’ ratings. Overall, the analysts have a consensus price target of $24.37 per share.