Shares of Tata Consultancy Services Ltd (TCS) fell nearly 2% on Thursday's trade after the IT major's Q4FY23 earnings missed the street expectations.
The IT behemoth on Wednesday saw a 15% increase in its consolidated net profit during the fourth quarter, rising to ₹11,392 crore from ₹9,926 crore during the same period last year. For the quarter under review, operating revenue increased by roughly 17% from the prior year to ₹59,162 crore.
However, in 11 quarters, the company's constant currency (CC) revenue growth was the slowest. In addition, the company's earnings before interest and taxes (EBIT) margin and US Dollar revenue also missed the street's expectations.
The IT major reported 0.6% quarter-on-quarter (QoQ) revenue growth in CC terms in a seasonally weak quarter. In terms of revenue by geographies (in CC terms), North America market, grew only +9.6% year-on-year (YoY) while the UK and Continental Europe reported growth of +17, +8.4% YoY, respectively.
Due to some onsite sticky costs, which offset the advantages of cost pyramid optimisation, greater utilisation, etc., EBIT margins were constant at 24.5%.
The firm declared a final dividend of ₹24 per share for the fourth quarter of FY23, with a total payout of ₹115 per share for the year. ( versus ₹43 pershare in FY22). The company recorded CC growth of 13.7%, or 8.6% in US dollars, for FY23.
Rajesh Gopinathan, chief executive officer & managing director in a press conference on Wednesday said that the fourth quarter's results were "definitely weaker-than anticipated."
According to Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities, TCS reported a weaker than expected earning performance and missed across the broad on street expectations.
Weakness in US BFSI and continued challenges in European countries brings in a muted outlook for the medium term.
"We have also seen management has turned cautious in their incremental growth for the medium term considering the medium term scenario. While the order book remains healthy giving the long term outlook to remain optimistic. Technically, as expected upside is limited to ₹3,250-3,300 and would see selling pressure on the higher levels," added Tapse.
On the technical front, the stock hit a intraday low of ₹3,181 and high of ₹3,230. The stock lost nearly 1% in the past one week.
"The stock has seen a gap down opening post the result announcement however no major traction and any further dip would be an opportunity to enter long positions, we see strong support around ₹3,120 - 3,150 whereas on the upside ₹3,350 is resistance," said Rajesh Bhosale - Equity Technical and Derivative Analyst, Angel One.
According to Mintgenie poll, 42 analysts have recommended 'hold' rating for the stock.
