Why Infosys Shares Soared


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Indian IT services specialist Infosys surged 20% today, after its quarterly results and guidance topped Wall Street expectations.

So what: Infosys shares have slid since October on concerns over a slowdown in tech outsource spending, but today's third-quarter beat -- EPS of $0.76 on revenue of $1.91 billion versus the consensus of $0.72 and $1.85 billion -- coupled with upbeat full-year guidance, eases some of those worries. Unfortunately, the tough pricing environment continues to weigh heavily on the company's margins -- third-quarter operating margin declined 531 basis points, to 25.7% -- preventing a few Wall Street firms from getting too bullish on the stock.

Now what: Management now sees full-year EPS of $2.97 and revenue of at least $7.45 billion, also ahead of the average estimate of $2.95 and $7.32 billion. According to a statement by CEO S. D. Shibulal:

We continue to gain confidence from a strong pipeline of large deals. However, the broader economic environment remains difficult. Even so, we remain cautiously optimistic about the January-March quarter.

With the stock now flirting with its 52-week high, and trading at a forward P/E near 20, however, I'd wait for some of today's excitement to fade before buying into that optimism.

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The article Why Infosys Shares Soared originally appeared on Fool.com.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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