Infosys: Feast Or Famine? Prepared For Both

Apr.14.14 | About: Infosys Limited, (INFY)


INFY will report earnings tonight while everyone Stateside is fast asleep.

Conference Call Tomorrow at 8.30 am eastern.

Are you positioned for both feast or famine?

Infosys (NASDAQ:INFY) will be reporting numbers for its fiscal fourth quarter tonight when most investors Stateside are asleep. The company is expected to report earnings of $0.79/share on revenues of $2.11 billion for its fiscal growth quarter ended March 31, 2014. For the fiscal year ended March 31, 2014, current consensus is for earnings of $3.03 on revenues of $8.28 billion.

For the June quarter (FQ:01) the Street is expecting earnings of $0.78/share on revenues of $$2.15 billion. For the year ended March 31, 2015, current estimates are $3.35/share on revenues of $9.06 billion.

One of the most important questions/discussions will be on the massive top management turnover the company has undergone since Murthy came back to take the top job. Gone are Kakal, Balakrishnan and at least 7 other highly respected members of upper management. Murthy has stressed that the high level management departures will have very little impact on business and sales flow but I would take that with a small pinch of salt, at the least. You can't have 9 top managers leaving and feel no or very little impact on the business one way or another.

Analysts in India are expecting the company to guide FY15 revenues higher by anywhere from 3-8% growth over FY14 with consensus being in the 6-8% range.

The local (India-based) Goldman Sachs analyst believes that INFY will announce a one-time special dividend of INR 50 plus a regular dividend of INR 25 for a total of INR 75 or roughly $1.25/ADS. Pretty nice if they'd announce that. INFY had a cash hoard of slightly over $4.5 billion USD as of the end of the December quarter.

Shares of INFY are down 8% in India this year versus a rise of 8% in the NIFTY.

My take on INFY is that it will more than likely be range bound in the $50-$60 range. If the company managed a small beat and raises to the upper level of current guidance, I expect the shares to rally.

I have hedged my position and am poised to more than likely benefit, feast or famine. We have sold at-the-money calls and puts and used a portion of the proceeds to buy out of the money puts and calls.

I will be blogging on my site live tomorrow morning since I happen to be in India at the moment.

Good luck going into the INFY calls, whichever you are positioned, bull, bear or straddling the fence.

Disclosure: I am long INFY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: long weekly calls and puts,