Tata Consultancy Services Ltd (TCS) shares closed nearly 1% lower in trade on Friday, i.e. 17 January, ahead of the company’s earnings announcement for the third quarter ended December (Q3) scheduled for later in the day.
The TCS stock closed the session at Rs 2,220, down 0.8%, after hitting the day’s low of Rs 2,213. The stock has gained nearly 17% in the last one year compared with an over 13% rise in the benchmark Nifty 50 index.
Considering the fact that Q3 is a seasonally weak quarter for IT companies, TCS is expected to post muted set of numbers for the December quarter.
“Revenue may see a rise of 6.6% YoY to Rs 39,788.5 crore. In dollar terms, the revenue may come at $5,588 million. EBITDA (earnings before interest, tax, depreciation and amortization) margin may come at 27.1%,” domestic brokerage firm Motilal Oswal Financial Services Ltd said in a report.
It added that TCS might see some weakness in its BFSI (banking, financial services and insurance) and retail numbers for the December quarter. The brokerage is, however, of the view that better utilisation and rupee’s depreciation will drive margins.
In terms of bottom line, Motilal Oswal expects TCS’ profit after tax to grow a 2.3% year-on-year or 3.3% quarter-on-quarter (QoQ) to Rs 8,305 crore.
Edelweiss Securities said it expected TCS Q3 revenue to grow 7.4% YoY and 2.9% QoQ to Rs 40,110.8 crore. “After a slow H1 FY20, we expect TCS to deliver 1.7% CC (constant currency) revenue growth, whereas a strong GBP (pound) should help lift USD (dollar) revenue growth rate by 40 basis points," it said.
“Gains from a weak rupee and operational rigour should help TCS expand margins by 40 bps QoQ. We will be monitoring commentary on the macro environment and demand in BFSI and retail," Edelweiss added.
Kotak Securities also said it expected revenue growth for TCS to moderate to 6.8% year-on-year in terms of constant currency (CC) to the tune of Rs 39,864.4 core due to slowdown in BFS and retail and high base of the previous year. On a sequential basis, revenue growth could down to 0.8%, it added.
It further said it expected a 1.5% year-on-year increase in reported profit after tax (PAT) at Rs 8,224.3 crore for the December quarter.
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