Mar­gin Con­cerns Dent TCS Earn­ings Es­ti­mates

The Economic Times - - Companies -

Shares of Tata Con­sul­tancy Ser­vices (TCS), In­dia’s largest IT com­pany, dropped 2.8%on Wed­nes­day as an­a­lysts re­duced their earn­ings es­ti­mates on ac­count of lower op­er­at­ing mar­gins. This is de­spite the fourth-quar­ter prof­its beat­ing ex­pec­ta­tions and rev­enue be­ing re­ported in line, snap­ping a six-quar­ter Credit We pre­fer lead to a de­layed re-rat­ing of the stock. IIFL cut FY17/18 EPS es­ti­mates by 2% due to lower Q4 mar­gins.

HDFC Se­cu­ri­ties said it prefers In­fosys and HCL Tech among IT large caps; while Phillip Cap­i­tal said though TCS is trad­ing at par with Infy it sees this par­ity chang­ing into a dis­count over the next 12 months.

Buy Our rel­a­tive pref­er­ence is for In­fosys on bet­ter earn­ings de­fense and tech­ni­cal fac­tors

We ex­pect 4Q re­sults

TCS is trad­ing over the next

Ex­pect spree of dis­ap­point­ing re­sults. An­a­lysts see po­ten­tial risks to TCS’ mar­gins go­ing ahead, de­spite the man­age­ment main­tain­ing over­all mar­gin out­look due to wage hike and visa costs in 1Q FY17. Many be­lieve that in­vestors will com­pare earn­ings growth of TCS with com­pe­ti­tion, and this will In­fosys and HCL do not

Neu­tral at par with In­fosys, but twelve months

rev­enue

Buy in­di­cate a case for up­ward stock

Ac­cu­mu­late growth rates to con­verge

Ac­cu­mu­late We have mod­er­ated our mar­gin ex­pec­ta­tions

J.P. Mor­gan Mor­gan Jef­feries Mac­quarie HDFC Se­cu­ri­tie JM Fi­nan­cial ICICI Cen­trum Broking Phillip Se­cu­ri­ties Do­lat Cap­i­tal Mar­ket Ko­tak

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