Tata Consultancy Services (TCS) was up 3% at Rs 2,785 on BSE in noon deals, trading nears to its three-years high, ahead of October-December quarter (Q3FY18) earnings on Thursday, January 11, 2018. The company’s board will also consider a third interim dividend. The stock trading at its highest level since March 4, 2015. It is less than 2% away from its all-time high of Rs 2,834 touched on October 7, 2014 on BSE in intra-day trade. For Indian information technology (IT) companies, the October-December quarter of 2017-18 is expected to be a muted one, weighing on their overall revenue performance. Though demand and revenue acceleration during the quarter could provide some optimism, implications of the US tax reforms and potential changes to the visa rules in that country remain an overhang, the Business Standard reported. TCS growth has likely bottomed out after slowing for three consecutive years.
Stable leadership, early leads into a number of high-growth areas and scale in multiple markets keeps TCS the strongest prospect for long-term growth, analyst at CLSA said in IT services sector outlook. TCS had a strong recovery in calendar year 2017 (CY17) with around 18% total return including its buyback, dividend and stock performance. We expect another solid year in CY18, it added. Analysts at Kotak Securities expect constant currency (c/c) revenue growth of 1.4% and negligible cross currency impact in Q3FY18. Growth would be impacted by usual seasonal furloughs and soft BFS in North America. “We expect EBIT (earnings before interest and tax) margin to recover 25 bps driven by operational efficiency and normalization of wage hike. Net profit growth would be muted due to lower other income and marginally higher tax outgo,” the brokerage firm said in Q3FY18 result preview.