TCS to announce Q1 earnings on July 9; here is what to expect

Country's largest IT services provider, Tata Consultancy Services (TCS) is expected to deliver steady growth in revenue but there could be pressure on the margin that may impact profitability in the first quarter of FY20. Company will announce its quarterly earnings on July 9.

The constant currency revenue growth could be more than 3 percent with around 20-50 basis points cross currency headwinds, driven by strong order book and retail segment.

"We expect constant currency revenue growth of 3.2 percent and cross currency headwinds of 50bps. We expect TCS to post broad-based revenue growth and expect strong deal momentum to continue," Prabhudas Lilladher said.

Narnolia said retail is expected to look positive in Q1FY20 as more demand is seen in the industry as the business shifts away from stores/traditional retailer to the web, social media.

Analysts expect some pressure on the operating margin on wage hike and visa cost but that could be offset a bit by better operation execution.

"We expect EBIT margin decline of 30 bps QoQ due to investments in business, rupee appreciation and higher visa costs partially offset by margin tailwind from reduced hedge losses on account of better hedge rates," Kotak said.

Prabhudas Lilladher expects EBIT margins to decline around 90bps on account of wage hike, INR appreciation and visa cost.

Key things to watch out for would be the management commentary of its BFSI vertical, the outcome of the budgeting cycle, growth outlook for the US and European geography, progress on platform strategy, growth outlook for DXC/HP channel, order bookings, impact of talent crunch in the US on margins, revenue contribution from Blackstone portfolio companies and new client acquisition channel and progress on localisation.

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