TCS to kick off Q3 earnings season; here are 5 things to watch out

As it is seasonally a weak quarter for IT companies due to holidays and furloughs in western markets, analysts expect revenue growth to be muted.

  

IT major Tata Consultancy Services will be the first bigger company to announce earnings for October-December quarter on Thursday. The stock price rallied nearly 4 percent on Wednesday ahead of numbers.

As it is seasonally a weak quarter for IT companies due to holidays and furloughs in western markets, analysts expect revenue growth to be muted.

Here are five key factors one should look at in earnings:-

Profit

Profit for October-December quarter is expected to be flat at Rs 6,460 crore against Rs 6,446 crore in previous quarter, according to average of estimates of analysts polled by CNBC-TV18.

Lower other income and marginally higher tax outgo may limit profit.

Revenue from operations

Revenue growth is likely to be muted as pick up in insurance etc may be negated by weak retail segment growth in Q3 and BFSI is expected to be soft.

Revenue in rupee terms is seen rising 1.4 percent sequentially to Rs 30,960 crore, from Rs 30,541 crore in September quarter.

Analysts expect dollar revenue to increase by 0.9 percent quarter-on-quarter to USD 4,781 million from USD 4,739 million and constant currency growth to be around 1.1 percent.

Operational Growth

According to a poll, earnings before interest and tax (EBIT) is expected to rise 4.3 percent to Rs 7,987 crore from Rs 7,660 crore and margin to expand by 70 basis points to 25.8 percent from 25.1 percent on sequential basis.

EBITDA (earnings before interest, tax, depreciation and amortisation) may grow 1.3 percent to Rs 8,269 crore from Rs 8,164 crore QoQ.

Operational efficiency and normalisation of wage hike may aid margins, analysts feel.

Sequential currency impact may be negligible but there could be 250-300 bps impact YoY.

Deals

Deals will be closely watched by the Street as TCS has seen some large deals in North America and Insurance.

Commentary

Impact of US tax reform

Commentary on client budgets and digitalisation in 2018

Outlook of BFSI and retail

Likelihood of sustenance of growth in telecom & healthcare segments

Progress on large deals and pipeline.

MORE WILL UPDATE SOON!!