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Last Updated : Oct 11, 2018 01:19 PM IST | Source: Moneycontrol.com

TCS stock falls 5% ahead of second quarter earnings

Most analysts expect TCS to lead the sector with revenue growth in the range of 3.5-4.5 percent, sequentially.

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Tata Consultancy Services share price fell nearly 5 percent intraday Thursday ahead of July-September quarter earnings due later in the day.

The stock price was quoting at Rs 2,006.25, down Rs 36.80, or 1.80 percent at 13:01 hours IST. In previous session also, it closed 2.27 percent lower on the BSE.

The country's largest software services exporter is likely to report strong earnings for second quarter almost all analysts on the Street have already predicted that the rupee tailwind is likely to play a big role in earnings of IT companies.

"Improving deal wins, higher share of digital segment and reducing pressure on legacy business are expected to be key drivers of growth in the quarter, coupled with Q2 being a seasonally strong quarter," ICICI Securities said.

Most analysts expect TCS to lead the sector with revenue growth in the range of 3.5-4.5 percent, sequentially.

"We have built in a 3.8 percent QoQ constant currency (CC) revenue growth with 150 bps QoQ cross-currency headwinds leading to a 2.3 percent growth in USD terms. Reported growth to be superior by 330 bps on sharp INR depreciation during the quarter," Emkay Research said.

Strong revenue growth and operational performance both are expected to boost profitability of the company.

ICICI Securities expects profit to grow 7.7 percent sequentially to Rs 7,905.4 crore, while Emkay sees profit growth at 8.6 percent QoQ. Sharekhan expects bottomline growth of around 8.8 percent QoQ.

Brokerage houses largely expect strong margin performance due to rupee depreciation and no wage hike in September quarter.

ICICI Securities as well as Phillip Capital feels EBIT margins could expand 150 bps QoQ to 26.5 percent on account of operational efficiency, rupee depreciation benefit and absence of wage hike, while Emkay sees 140 bps increase QoQ and Sharekhan sees a 120 bps rise.

Analysts will closely watch company's commentary on growth momentum in BFSI and retail, deal wins, client budgets, Digital, and any impact due to trade-related tensions.

In the last one year, top three positions in the buying list have been occupied by IT stocks. TCS has been the biggest gainer among Nifty50 stocks as the stock shot up 70 percent in last one year followed by Infosys (up 59 percent) and Tech Mahindra (52 percent).
First Published on Oct 11, 2018 01:19 pm
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