Tata Consultancy Services, which snapped its six-quarter streak of earnings miss in April, will be the first major IT company to report June quarter earnings. TCS, India’s biggest IT services outsourcer, is likely to report numbers post market hours today.
Here are five things to know ahead of TCS Q1:
1) TCS is expected to post a net profit of Rs 6,063 crore on sales of Rs 29,251 crore in the June quarter, according to brokers polled by NDTV Profit. Net profit is expected to fall 5.46 per cent sequentially, though sales are likely to rise 2.82 per cent versus March quarter. TCS had reported a net of Rs 6,413 crore on sales of Rs 28,448 crore in March quarter.
2) Wage hikes and visa costs likely hit TCS’ profitability in Q1 (June quarter), analysts said. TCS’ EBIT or operating margin is likely to be at 24.6 per cent in Q1 versus 26.1 per cent in Q4 (March quarter), according to estimates. TCS expects EBIT margin to remain in a band of 26-28 per cent in FY17, though most analysts expect margins to remain under pressure.
3) The June quarter is considered to be strong for domestic outsourcers, given that clients have firmed up IT budgets and there are more working days in the quarter. TCS is expected to post dollar revenue of $4,380 million in Q1, which translates into 4.1 per cent sequential growth. In constant currency, revenue likely grew at 3.6 per cent sequentially.
4) TCS’ commentary on Brexit will be keenly watched by analysts, as IT companies are expected to be the worst hit following Britain’s exit from European Union. According to Religare Securities, TCS gets 15 per cent of its revenue from the UK, where economists have predicted a recession following Brexit. TCS’ UK-based subsidiary Diligenta, which has not been performing well, could take more time to recover, analysts say.
5) TCS shares, along with other frontline IT stocks, have come under selling pressure since the Brexit vote last month. The management’s outlook on demand and commentary on Brexit, its insurance outsourcing arm Diligenta and margins would be the key to the stock’s fortunes in the coming days, analysts say.
TCS shares traded flat at Rs 2,492 on the National Stock Exchange as of 10.45 a.m., in line with the broader Nifty that traded 0.1 per cent lower.