On Friday, Bernstein analysts adjusted the stock price target for Infosys (NS:INFY) Ltd. (INFO:IN) (NYSE: INFY) shares, reducing it slightly from INR 2,350.00 to INR 2,330.00. Despite the price target adjustment, the firm maintained its positive Outperform rating on the stock. The revision followed Infosys's announcement of robust financial results, which included surpassing expectations in revenue, margins, and earnings growth.
Infosys reported a quarter-over-quarter constant currency revenue increase of 1.7%, which was higher than the consensus estimate of 1%. Moreover, the company revised its FY25 revenue growth forecast upward by 60 basis points, now expecting a 4.5%-5% year-over-year constant currency increase, which is ahead of market expectations.
This positive outlook is supported by a healthy deal momentum, with Infosys securing a total contract value of $2.5 billion, approximately 60% of which was net new business.
The company's earnings have been highlighted as the best of the season within the large-cap IT services sector, attributed to a recovery in discretionary spending. Bernstein regards Infosys as the top pick in the IT services industry, emphasizing the company's strong performance and upward trajectory.
The earnings before interest and taxes (EBIT) margin exceeded predictions by 10 basis points, coming in at 21.3%. This was influenced by a 30 basis point margin benefit from Project Maximus (NYSE:MMS) and a 40 basis point gain from currency tailwinds, which were partially offset by a 70 basis point impact from furloughs.
In terms of workforce, Infosys experienced a significant increase in headcount, adding approximately 5,600 employees quarter-over-quarter, more than double the number from the previous quarter. The company's earnings per share (EPS) also saw a notable year-over-year growth of 11.4%.
Following these results, Bernstein revised its FY25 and FY26 EPS estimates downward by 2.7% and 4.1%, respectively, to reflect the actual performance in the third quarter of FY25. The firm also increased its target multiple to 28 times the next twelve months' (NTM) price-to-earnings (P/E), up from the previous multiple of 27 times.
Despite the slight decrease in the price target, the new target of INR 2,330 remains indicative of Bernstein's confidence in Infosys's future performance.
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