Wipro Q4 earnings today: Five things to watch out for
Premium- Analysts expect Wipro to post a constant currency revenue growth of 3.6% sequentially,, in line with its Q4 revenue growth guidance of 2-4%.
Wipro Ltd is the last among tier-1 Indian IT services companies to declare its fourth-quarter earnings. The earnings of its larger peers Tata Consultancy Services Ltd (TCS), Infosys Ltd, and HCL Technologies Ltd were below Street expectations and reflected supply-side pressures that dragged margins. All eyes are on Wipro now to see whether it will follow its peers or buck the trend.
As per Bloomberg consensus estimates, Wipro is expected to post a net profit ₹3,005 crore on revenue of ₹20,819 crore.
Mint highlights five things to watch out for in Wipro’s fourth quarter (Q4) earnings that will be declared on 29 April, after market hours.
Revenue guidance and growth
Analysts expect Wipro to post a constant currency revenue growth of 3.6% sequentially, in line with its Q4 revenue growth guidance of 2-4%. In dollar terms, revenue is expected to grow 3.3% sequentially. “Growth would be led by higher spending on digital and cloud transformation initiatives, higher growth in existing accounts and incremental revenue contribution from Edgile and LeanSwift acquisitions," Sharekhan said in a pre-earnings note.
Operating margins
Margins are under pressure due to increased attrition and employee costs. “EBIT margins in global IT services are expected to decline by 30 basis points QoQ, due to impact of salary hike amid higher attrition. Overall EBIT margins are expected to decline 20 bps QoQ due to weak performance in IT services," ICICI Securities said. Brokerage firm Sharekhan believes EBIT margin in IT services is expected to decline by 10 basis points QoQ, owing to higher hiring expenses to backfill rising attrition and rising discretionary expenses.
Deal pipeline
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Investors will closely watch the deal pipeline of Wipro and how it has managed to ramp up some of the large deals it has won in the past. It acquired UK-based consultancy Capco for $1.45 billion last year, so, investors will monitor management’s commentary on the impact of Capco business due to current geo-political tensions. Commentary on the size and tenure of deals will be taken note of.
Attrition and wage hikes
As attrition has been on the rise across the industry, investors will keep a watch on the measures Wipro has taken to contain attrition and also on the wage hikes it plans to offer in the coming months. Wipro’s attrition rate on the last 12 months basis, rose to 22.7% in the December quarter from 20.5% in the preceding three months.
Management commentary on outlook
According to Sharekhan, investors will monitor management’s commentary on the demand outlook, especially in terms of the opportunities from shifting of budgets towards digital and cloud-transformation initiatives; outlook on demand environment in the financial, energy, and healthcare verticals; and future mergers and acquisitions (M&A) activities. Wipro continues its M&A activities, the most recent acquisition being that of US-based SAP consulting firm Rizing for $540 million.