Infosys Cuts FY17 Guidance; Stock Slumps 10%
Infosys came out with their earnings for the first quarter of FY17
Infosys Ltd. posted quarterly profit that was exactly in line with analyst estimates, but the stock fell as it cut its guidance for the financial year 2016-17.
Net income stood at Rs 3,436 crore in the three months ended June, the company said in its press release. Revenue came in at Rs 16,782 crore, compared to Rs 17,035 crore average of analyst estimates compiled by Bloomberg. Dollar revenue grew 2.2 percent, while analysts had projected 3.9 percent growth.
Revenue performance was impacted by unanticipated headwinds in consulting services business, and slower ramp-ups in large deal wins, the management told reporters in a press briefing.
The stock declined as much as 9.7 percent, as the company reduced its guidance for the year. Infosys predicts constant currency growth of 10.5 percent to 12 percent from the 11.5 percent to 13.5 percent range projected at the end of the previous quarter. In dollar terms, Infosys expects 10.8 percent to 12.3 percent growth, down from the previous range of 11.8 percent to 13.8 percent.
The earnings before interest and tax declined 4 percent to Rs 4,047 crore. EBIT margin fell 138 basis points to 24.12 percent, due to aggressive pricing strategies, and higher wage and visa costs. Analysts had expected 23.8 percent margin.
Managing Director and Chief Executive Office, Vishal Sikka, told reporters that margins will be under pressure in the short term.
Sikka added that Britain’s decision to exit the European Union will create some uncertainty in the near-term.
Attrition levels rose 370 basis points to 21 percent, from 17.3 percent. Utilization, excluding trainees, improved 40 basis points to 80.5 percent.
Pricing power declined 0.2 percent in constant currency terms. The management said the drop will be offset by cost optimisation measures.