What Brokerages Made Of Infosys And TCS’ Fourth Quarter Performance
Operating margin contracted for two of India’s largest technology companies—Tata Consultancy Services Ltd. and Infosys Ltd.—in the quarter ended March due to higher costs of training employees as the companies focus on digital services.
Both the companies met revenue expectations and deal momentum continued in the fourth quarter as well.
Here’s what brokerages said of Infosys and TCS’ fourth-quarter performance.
Bank of America Merrill Lynch
- Revenue outlook appears fine but margin missed.
- Expect consensus estimates to move lower.
- Considering digital growth and deal wins, guidance is underwhelming.
- Growth as well as margin guidance is conservative. Believe most cost hikes are behind.
- Q4 results below expectations on margin and guidance.
- Cut estimates and target factoring in a lower growth for FY20.
- Prefer TCS given its lower attrition and higher margin resilience.
- Revenue growth guidance in constant currency appears to be conservative.
- Operating leverage on investments key to margin performance.
- Cut FY20 EPS estimates by 4.9% and FY21 by 4.2%; downgrade stock.
- Margins, attrition still key worries amid strong revenue growth.
- Operating leverage thesis playing out will be tested.
- Stay ‘Overweight’ as we agree with the management’s view on operating leverage.
- Operating leverage in the business model should come through in FY20.
- Margin recovery will happen earliest in FY21.
- Expect price-to-earnings ratio gap between TCS and Infosys to rise to 20 percent.
- Cut FY20-21 earnings-per-share by 1-3 percent; target price raised as rolled over.
- Revenue outlook appears conservative in the backdrop of deals.
- Lopsided Q4 growth, should be addressed by healthy deal wins.
- Recent disappointment on margins should see its worst in Q1FY20.
- Q4 saw miss on margins, outlook disappointing.
- Expect the stock to react negatively to the results.
- HCL Tech is our preferred pick in Indian IT.
- Weakness in banking could cause some concern on revenue upside.
- Expect a muted reaction on the stock given the lack of surprises.
- Healthy revenue growth across verticals and geographies.
- Improving digital revenue growth, robust deal wins and optimistic sector outlook.
- Maintain ‘Hold’ due to rich valuations.
- Steady quarter which is broadly in line with expectations.
- The opportunity from core transformation programmes are opening.
- Improving deal wins indicate a stronger H1FY20.
- Broad-based growth overall and finally, double-digit growth in BFSI.
- Margin defence despite currency has been solid.
- TCS is our top pick in the large cap Indian IT space (along with HCL Technologies Ltd.).
- Deal wins, acceleration in BFSI segment suggest momentum is intact.
- Valuations keep us ‘Neutral’ on TCS.
- Will treat any incremental weakness in the stock as an opportunity to buy.
- Q4 beat cements TCS as the king of the hill.
- Valuations to Infosys will continue to be at a premium.
- Revenue beat, improved banking momentum, margins will aid premium to Infosys.