It’s a big day i.e., January 9, today when IT giant Tata Consultancy Services (TCS) announces its financial numbers for the quarter ending December 31, 2022 (Q3FY23). TCS shares are also on the agenda this week. It is TCS, which holds the largest market share in the industry, that will present earnings for Q3FY23. As supply-side disruptions ease, the company expects to see an improvement in operating margins in Q3. The announcement of TCS’ third interim dividend will also be important to watch out for.
In addition, analysts will be paying attention to the company’s margin outlook, management’s comment on the impacts of higher energy prices on technology spending, and any delays in projects as a result of macro uncertainties, high inflation, and disruptions in the supply chain.
Expect Profit in double digit
For the quarter, TCS is expected to report a double-digit increase in profit over last year.
In anticipation of Q3 earnings, TCS shares closed at 3,212 apiece on BSE down by 2.97%. The company had a valuation of over 11.75 lakh crore as of January 6, 2023, making it the second biggest Indian company in terms of valuation after RIL.
A third interim dividend for FY23 will be considered by the board of directors on January 9 at the company’s annual meeting. Third interim dividend holders will be determined on January 17 based on the company’s record date.
TCS Q3 results: what to expect?
According to ICICI Direct on TCS’ Q3FY23 preview report, furloughs are expected to hit the quarter, at a higher rate than in recent years. A decrease in supply-side pressure, however, is anticipated to boost margins QoQ.
In addition, the brokerage noted, “We expect TCS to report CC QoQ growth of 1.5% for the quarter buoyed by continued deal execution, although it will be slower than strong H1 due to fewer working days.
There may be some weakness in some parts of the BFSI, hi-tech, and manufacturing sectors in Europe because of macro concerns and energy constraints. Revenues are expected to increase by 1.2% on a QoQ basis, despite 30 bps cross-currency headwinds.
The depreciation of the rupee is expected to boost rupee revenue by 3.5% QoQ. As supply-side pressure eases, attrition moderates, and the rupee depreciates, we expect margins to improve 20 bps QoQ.”
Furthermore, ICICI Direct anticipates that TCS’s deal momentum will continue with a skewed mix towards cost-cutting deals
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