*Tata Consultancy Earnings to Be Hurt by Weak Tech Spend: Preview*
*Tata Consultancy Services* is set to report yet another quarter of lackluster earnings as the technology bellwether continues to see clients avoiding discretionary spending due to inflationary pressures.
Tata and global peers such as Accenture have struggled with revenues as clients curtailed spending on their software-service related contracts. The Mumbai-headquartered firm’s shares are up about 3% year-to-date, compared with a 12% gain for the NSE Nifty 50 Index.
Wage hike impact: Most brokerages expect a decline in earnings before interest tax margins for TCS in the range of 140 to 186 basis points quarter on quarter owing to wage revision and likely decline in utilisation rates.
The company’s constant-currency sales growth could “remain depressed in the low-single digits, confirming our view that near-term demand for consulting-related projects are under pressure despite much commentary around generative-AI demand,”.
Tata Consultancy will report June quarter earnings on Thursday after close of trading hours.
*FIRST QUARTER*
- Net income estimate 119.57 billion rupees (Bloomberg Consensus)
- Revenue estimate 621.21 billion rupees
o Financial segment revenue estimate 197.26 billion rupees
o Manufacturing segment revenue estimate 57.71 billion rupees
o Retail, consumer segment revenue estimate 99.18 billion rupees
o Lifesciences, healthcare segment revenue estimate 68.66 billion rupees
- Cost of revenue estimate 372.08 billion rupees
- Employee benefits expenses estimate 239.38 billion rupees
- Depreciation and amortization estimate 12.81 billion rupees
- SG&A expense estimate 96.37 billion rupees
- Operating income estimate 152.45 billion rupees
- Operating margin estimate 24.7%
- Dividend per share estimate 16.34 rupees
*DATA AND ANALYSIS*
- 29 buys, 11 holds, 8 sells
- Avg PT 4,197 rupees (5.9% upside from current price)
- Shares up 21.1% in past year vs SENSEX Index up 22.6%
*Management’s commentary:* Analysts are also keenly interested in managements commentary on client discretionary spending, fewer deal announcements in Q1FY25, campus hiring, large deals and turnaround in BFSI. Further the state of spending in the impacted North America market, hi-tech & telecom verticals, pipeline of deals, and levers to defend and increase margins will also be key monitoring points for investors.
By: via AlliesFinServe #StockMarket #Bharat Telegram.me/AlliesFin
