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Apr 16, 2013, 06.49 PM IST | Source: Moneycontrol.com

Here's what to expect from TCS Q4 earnings

India's largest software services exporter Tata Consultancy Services will report fourth quarter results on Wednesday. Infosys disappointed the street last week, forecasting FY14 US Dollar revenue growth much lower than what industry body NASSCOM expects.

Here's what to expect from TCS Q4 earnings
Moneycontrol Bureau

India's largest software services exporter Tata Consultancy Services will report fourth quarter results on Wednesday. Infosys disappointed the street last week, forecasting FY14 US Dollar revenue growth much lower than what industry body NASSCOM expects. So all eyes will now be on TCS performance, especially since it has been outpacing its Bangalore-based rival over last several quarters now.

"TCS should lead the sector in terms of US Dollar quarter-on-quarter revenue growth (about 2.8 percent quarter-on-quarter) in March-13 quarter," said Viju George of JP Morgan.

TCS had said last year its growth in FY13 will be ahead of what NASSCOM had forecast. It has earlier said it expects 2013 to be a better year than 2012, even as Infosys has warned of challenges. The Tata group company doesn't issue specific guidance like Infosys. So all eyes will be on management comments on the road ahead.

TCS' constant currency revenue growth is likely to be around 3.5 percent quarter, but operating margins are seen down 120 bps, according to George. Margins are expected to decline 100 bps on the back of a class action lawsuit settlement in the US and 20 bps due to modest Rupee appreciation.

Vipin Khare and Gaurav Rateria of Morgan Stanley expect TCS to continue with its resilient revenue growth and margin performance. They expect its Dollar revenue to rise 3.1 percent sequentially and Rupee revenue is seen up 2.3 percent.

"We expect Mar-13 USD revenue growth to be in line with last quarter's performance. However, commentary for FY2014 could continue to stay strong and consistent with earlier quarters," they said.

KEY THINGS TO WATCH

-- Management comments on clients' discretionary spending the general demand environment looking ahead in FY14
-- Margins in Q4 and the direction ahead.
-- Deal wins in the quarter
-- Hiring plan for next year and wage hikes if any in FY14

STOCK WATCH

TCS shares closed at Rs 1,483.15 on NSE on Tuesday, up 0.7 percent. The stock has gained 18 percent since Dec-end, compared with the 6 percent uptick in the wider CNX-IT index. The IT index tanked last Friday after Infosys slumped over 20 percent due to disappointing earnings.

JP Morgan has a "neutral" rating on TCS, citing "relatively full" valuations. Axis Capital still advises a buy.

"Client mining coupled with consistency in large deal wins will drive FY14 growth. Industry leading growth to support premium valuation," said Priya Rohira, ED - IT & Telecom at Axis Capital.

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