5 things to know about TCS, Infosys results

The Indian IT giants–Infosys and TCS—are one of the biggest stocks in the market. Plus, they are one of the first companies to announce earnings in every quarter. They then set the

tone for the entire quarter. Analysts expect the IT companies to announce a weak quarter. With that in mind, let’s look

at the earnings results of the two giants:

Second rate hike: This is the second rate hike since the Fed first indicated it plans to increase interest rates. It first increased rates in its December 2015 review meeting for the first time in almost 10 years.

#1

Beating the Street:Both Infosys and TCS exceeded expectations for the quarter to December 2016.That said both the companies’ results were a mixed bag.

Inflation to rise: The US central bank has worried about the rise in inflation, a by-product of a prospering economy. It expects inflation to climb to 2% over the medium term. This was the main reason behind the rate hike.

#2

Guidance:Investors are more interested in a company’s future. This is why the guidance matters more.Infosys cut its expectations of growth for the full year again for the third year. It now expects its dollar revenues to grow 7.2-7.6%, lower than the previous estimate of 7.5-8.5%.TCS does not give guidance. However, it is likely to see its dollar revenues grow by just 6%, as per media reports. This is lower than its previous year’s growth of 7.1%.

More hikes expected: The US Fed also indicated that three more hikes can be expected in the next year. Each hike could see interest rates increase by another 0.25 percentage point

#3

Profits:Both companies reported a rise in Dollar profits in the quarter to December 2016.Infosys’net profit grew 1.5% to $547 million from $539 million in the previous quarter.TCS too announced a rise in its quarterly profits.Net profit in dollars rose 1.6% on a quarter-on-quarter basis to $1 billion.

#4

Revenue:Infosys announced revenue of $2.55 billion for the October-December 2016 quarter.This is 1.4% lower than the $2.58 billion revenue it reported in the September 2016 quarter, meeting analyst expectations.TCS, meanwhile, reported a 0.3% increase in revenue to $4.379 billion over the same period.However, this translates to a 2% growth if you take away the currency conversions and fluctuations.

#5

Margins:The best news came from the Margins section in the results.Analysts expected either a lower or stable margin.However, Infosys beat expectation by announced a 0.2% increase in operating margin to 25.1%.It’s net margin too widened by 0.6% to 21.5% from the previous quarter.Despite Q3 being a weak quarter, TCS managed to keep its margin steady.It announced an operating margin of 26%, unchanged from the previous quarter.

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