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TCS stock likely to decline on Friday due to results

Tata Consultancy Services reported a third quarter only mildly below expectations, but the stock is likely to see some profit booking on Friday.

TCS reported dollar revenue growth of 3% quarter on quarter, missing average analyst estimates of 3.5%. Volume growth came in at 1.8% compared to expectations of about 2.25%. However a slight increase in pricing helped the company cushion the full impact of poor volume growth from reflecting on revenue.

Net profit rose 13%, and was ahead of estimates of a 10% growth, but the difference was entirely due to forex related gains rather than any operating benefits.

In fact, operating profit margin declined by close to half a percentage point due to a stronger rupee.

While the numbers are not that bad, and would call for a correction of only about a percent or so, the market is likely to see this opportunity to book some profits as there is unlikely to be a similar trigger in the short term.

The management tried to prevent any downside on Friday by giving a bullish outlook on demand in the new year. However, a slight correction is likely in the stock, even as Infosys may gain as its 0.7% growth in volumes suddenly looks decent.

It must also be kept in mind that the stock of Wipro Ltd, which is due to report results on Friday evening, is up 5% on the Nasdaq stock exchange in the US overnight.

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