TCS to announce Q4 earnings tomorrow. Here's what to expect

 The company's stock will be in focus as well following the earnings. In the quarter, TCS is expected to record improvement in operating margins, while some cross-currency headwinds.

IT-giant, Tata Consultancy Services (TCS) is set to announce its financial performance for the quarter ending March 2022 (Q4FY22) period. The company's stock will be in focus as well following the earnings. In the quarter, TCS is expected to record improvement in operating margins, while some cross-currency headwinds.

Last week, on Friday, TCS shares held steady and ended at ₹3686.85 apiece marginally up from the previous closing on BSE. At the closing stock price, TCS market valuation stood at over ₹13.49 lakh crore.

In the previous week, TCS shares have broadly tumbled nearly 2% as focus shifts on the fourth quarterly and year-end performance for the fiscal FY22.

For TCS' fourth quarter, Manik Taneja and Dimel Francis analysts at JM Financial said, "We are building in a 3.5% QoQ c/c growth with ~60 bps cross-currency headwinds. Expect EBIT margins to improve slightly by 20 bps QoQ to 25.2% aided by growth leverage and slight INR depreciation."

Key things to watch out for, as per JM Financial's analysts are - CY22/FY23 client spending outlook; margin performance and outlook especially given the likely resumption in travel and supply-side pressures; and outlook on pricing.

JM Financial analysts expect TCS revenue at $6,712 million with a growth of 12% yoy and 2.9% qoq. In rupee terms, the revenue is expected at ₹50,676.2 crore rising by 16% yoy and 3.7% qoq. Meanwhile, net profit is seen at ₹10.065,6 crore up by 8.9% yoy and 3% qoq. As for EBIT, it is seen at ₹12,766.6 crore higher by 8.8% yoy and 4.3% qoq. EBIT margin is forecasted at 25.2% contracting by 170 basis points yoy but improving by 20 basis points on qoq.

On TCS shares outlook, the JM Financial analysts give a 'Hold' recommendation with a target price of ₹4,100 apiece.

On BSE, TCS has clocked a 52-week high of ₹4,045.50 apiece currently.

During Q3FY22, TCS posted a 12.3% yoy growth in consolidated net profit to ₹9,769 crore with a net margin of 20%. Consolidated revenue jumped 16.3% yoy to ₹48,885 crore. Constant currency revenue growth was at 15.4% yoy.

In the December 2021 quarter, TCS all verticals grew in the mid to high teens. Growth was led by Retail and CPG (20.4%), BFSI (+17.9%), and the Manufacturing vertical (+18.3%). Technology & Services grew +17.7%, Life Sciences and Healthcare grew +16.3% and Communications & Media grew +14.4%.

Also, TCS had crossed a new milestone in Q3 with the number of women in its workforce crossing 2 lakh. TCS added 28,238 employees on a net basis, taking the total number of employees to 556,986 as of December 31, 2021. IT Services attrition rate (LTM) in Q3 was 15.3%.