TCS Share Price: How This Tata Stock Will React To Its Q2FY24 Results Card On October 12?

Tata Group-backed flagship company, Tata Consultancy Services (TCS) met Street's expectations in the September quarterly earnings for FY24. However, this behemoth Tata stock is expected to react between neutral to negative tone when markets open on October 12 to its Q2FY24 result card.

In Q2FY24, TCS posted single-digit growth in both revenue and bottom-line front, while its buyback offer of Rs 17,000 crore was below estimates. Further, the EBIT margin stayed healthy, and there was a significant drop in the attrition rate alongside a decline in the workforce. TCS has hinted at continued experimentation in the Gen-AI field. Apart from this, the company's order book was also stable.

TCS' net profit stood at Rs 11,342 crore on a consolidated basis, registering growth of 2.4% QoQ and 8.7% YoY. TCS posted EBIT of Rs 14,483 crore, up by 2% sequentially, while the EBIT margin expanded by 70 bps to 24.3% in Q1FY24. Notably, margin expansion drives EPS growth of 8.7% YoY. Further, consolidated revenue from operations stood at Rs 59,692 crore, seeing marginal growth of 0.5% sequentially but a 7.9% growth on YoY terms.

In constant currency, the revenue growth came in at 2.8% YoY. However, dollar revenue was $7.2 billion for the quarter, declining by 0.2% sequentially which is for the first time since the April-June quarter of FY20.

Further, in the quarter, TCS also let go of a total of 6,333 employees in the September 2023 quarter of FY24. Moreover, the TCS attrition rate has also dipped sharply to 14.9% in the quarter. Apart from this, the company claimed that it now have a 100,000-strong pool of Gen-AI Ready consultants and prompt engineers.

Traders too had a reward stored in from TCS. The largest tech player in India, TCS has declared a second interim dividend of Rs 9 per share, alongside a buyback offer worth Rs 17,000 crore.

How Will TCS Share Price React To Q2 Numbers?

Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd said, "TCS reported Q2 earnings that met street expectations while buyback price was below expectations and even below the last buyback price. US Dollar revenue declined for the first time in many quarters while Q2 EBIT Margin was better than expectations. TCS board approved buyback of Rs 17,000 crore at a price of Rs 4,150 per equity share against street expectations of Rs 4,300 to Rs 4,500 per share. The buyback price is at a premium of about 15 per cent."

Tapse added "The company will be buying back up to 4.09 crore shares which will be 1.12% of the total equity share capital. Deal wins during the quarter stood at $11.2 billion which is a rise of 9.8 percent compared to the June quarter. Reacting to Q2 numbers and buyback announcement, there is a high probability of neutral to negative opening for the TCS stock tomorrow (October 12) morning."

Meanwhile, Dhruv Mudaraddi, Research Analyst, StoxBox said, "sustained growth. Notably, TCS has secured a substantial order book, registering its second-highest TCV in a quarter. Efforts to boost employee utilization, enhance productivity, and improve cost efficiency have led to an impressive QoQ growth in operating margin. The share buyback is another example of the company's commitment to driving growth and profitability."

In terms of industries, Mudaraddi highlighted that revenue growth was driven by Manufacturing, Healthcare and Energy, Resources & Utilities verticals. Geographically, softness in demand in North America continued while the UK, Middle East & Africa, and Latin American markets made robust gains. Within the services spectrum, AI.Cloud, TCS Interactive, IoT, and Digital Engineering are emerging as revenue drivers, alongside Cyber Security, Enterprise Solutions, and Cognitive Business Operations.

Further, Mudaraddi said, "TCS's strategic investments in Gen AI readiness, with a formidable pool of 100,000 consultants and engineers, position the company to address client needs in this realm. By continuing to adapt to evolving client needs and fostering innovation, we believe TCS is poised to maintain its upward trajectory."

"We will be keeping a close eye on management guidance for future performance and their outlook on the demand scenario in North America and Europe in the coming quarters," Mudaraddi added.

Ahead of the earnings, TCS share price closed at Rs 3,610.20 apiece, down by Rs 19 or 0.52% on BSE. TCS shares will react to Q2 numbers on Thursday.