Infosys (INFY +6.32%) stock jumped 6.6% through 2 p.m. ET Thursday -- not because of anything Infosys did, but because of what rival IT consultant Accenture (ACN +17.14%) just reported.
Heading into Accenture's Q4 earnings report this morning, analysts expected Accenture to report a $3.19 per share profit on just over $18 billion in quarterly sales. In fact, Accenture earned $3.29 per share on $18.7 billion in sales -- beating on both top and bottom lines.
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What Accenture's earnings beat (might) mean for Infosys
Accenture reported 6% sales growth in Q4, 370 basis points worth of operating margin improvement, and a huge increase in net income -- up 46%. (Free cash flow grew only 6% year over year, merely pacing revenue growth.)
Accenture also gave guidance for the coming fiscal year 2027, forecasting sales growth to slow somewhat to a range of 3% to 6%, but for profit margins to continue expanding, resulting in earnings growth of 6% to 9%.
Investors appear to be looking at Accenture's good Q4 news and decent guidance for the coming year, and extrapolating from this that Infosys may also report strong numbers (and guidance) when its own earnings come out on Oct. 23.
NYSE: INFY
Key Data Points
What's next for Infosys?
So what must Infosys report to match Accenture's earnings beat?
Analysts polled by Yahoo! Finance see the company growing sales 10.7% to $492.5 billion, with earnings growth of only 5% to $0.21 per share. That's a high bar for sales growth, relative to what Accenture just reported, but a really low bar on earnings growth.
At just 13.3 times trailing earnings, Infosys stock looks cheaper than Accenture at 14.7 times earnings. It'll need to grow earnings a lot faster than just 5%, however, to make it a buy in my book.
