IT Services: Q3FY19 Earnings Preview

The shares of IT Services company have remained one of the best performers in the year 2018. The year 2019 is also supposed to start with a good note.  Although the third quarter of the year is seasonally weak for IT companies, this time we expect most of the companies to report growth in double digits in constant currency. In addition to this, we will also see inflows of good deals in Q3FY19.

The topline of the companies will get negatively impacted due to the depreciation of the US dollar against the major global currency. Hence, we may see companies reporting constant currency topline growth of 1.0 to 3.7 per cent on a quarterly basis. Nevertheless, margins are likely to expand on the back of depreciation of Indian rupee against US dollar. Mid-size IT companies are expected to perform better than the large size companies.

Among the large-cap companies, HCL Technologies is expected to be the best performer, while, Wipro will witness a growth lower than the industry average.
In mid-cap companies, Persistent will see the best growth in revenues on a sequential basis, while Intellect will see a subdued growth.

The key factors to watch in the third quarter of FY19 are the trend of the deal flow and the commentary on the IT budget spends by companies. The guidance of large companies for the year will also set a tone for the performance of their stock in 2019.