Preview: Will Infosys cut guidance for the year?

Software bellwether Infosys is set to declare its earnings tomorrow for the July-September quarter of financial year 2012-13. There has been speculation that the appreciation of the rupee is likely to prompt Infosys to cut its guidance for the year.

However, analysts are divided on this.

BRICS expects Infosys to cut rupee revenue growth guidance by 4.5 percent, while Nomura sees the company to cut only EPS guidance by 2 percent to Rs 163.

Barclays, however, expects the company to revise the revenue guidance upward.

“We estimate Infosys’s FY13 revenue growth guidance of 5 percent y/y could be upgraded by 1.5 ppts (percentage points) on the back of the Lodestone acquisition,” it said.

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Citigroup expects the company to lower its revenue guidance too.

“We expect Infosys’ Q2 revenue growth to accelerate (3.4% quarter-on-quarter) but FY13 EPS guidance is likely to be lowered due to sharp appreciation in rupee guidance now likely at Rs 53 per US dollar levels versus Rs 55 per USD at the end of Q1,” said Citigroup analysts Surendra Goyal and Rishi Iyer.

Core growth guidance is likely to remain unchanged despite 4.2% q/q revenue growth, it said.

Most of the analysts expect Infosys to fare better on quarter.

“On the bottom line, Infosys could fare better, in our view, from hedging gains given substantial reduction in forward premiums on hedges over the last quarter and the company’s accounting policy of marking to market all hedging gains/losses every quarter and taking it to the P&L account,” Nomura said.

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Infosys has been disappointing the Street over the last few quarters and shares have been under tremendous selling pressure on the days when results have been announced.

Infosys gained nearly 18 percent since hitting a low in July when it announced a deeper-than-expected cut to its full-year growth forecast. However, for the year the IT major has corrected by nearly 10 percent compared to the benchmark index which has appreciated by over 20 percent.

Management commentary on pricing, wage hike, attrition rate and hiring will be closely watched.