Initial Q2 numbers fail to meet estimates

Written by fe Bureau | Mumbai | Updated: Oct 29 2014, 07:40am hrs
The latest results season has failed to create a buzz, with many companies from the IT and financial services space failing to meet earnings expectations.

However, thanks to better-than-anticipated numbers posted by healthcare players and auto ancillary companies, a collective universe of 78 companies that reported their earnings has managed to beat Street estimates by a moderate 1.5%, shows a Bloomberg compilation. The compilation shows that, other than Infosys, which managed to outdo the consensus earnings expectations by 4.8%, other majors like TCS and Wipro lagged the estimates by 2-3%. While both TCS and HCL Tech reported subdued operating performance, a caution by TCS on the third quarter being soft weighed on the stocks, with both companies losing 7-9% since mid-September.

Mastek earnings have fallen behind analyst estimates by a staggering 82%, show Bloomberg data. In the financial services sector where a couple of major banks have announced their results, asset quality concerns have sustained on the back of a slower credit growth.

As per data comparing actual earnings per share (EPS) with consensus expectations, Gruh Finance, Bajaj Finserv, Kotak Mahindra Bank, Shriram Transport Finance, L&T Finance Holdings and South Indian Bank missed the predicted quarterly numbers by 1% to 36%. On the other hand, Healthcare majors Lupin and Ranbaxy, which announced their quarterly numbers on Tuesday, surpassed estimates by 9% and 269%, respectively. While Lupin reported a y-o-y jump of 54% in its net profit to Rs 630 crore on the back of robust US ales, Ranbaxy turned profitable for the first time in six quarters as the drug-maker benefited from an exclusive US launch of a cardiac drug.

Two-wheeler companies Bajaj Auto and Hero MotoCorp met Street estimates, while some of the smaller auto ancillary companies like Jay Bharat Maruti, Triton Valves, Bharat Seats and Automobile Corp of Goa surpassed quarterly earnings estimates by 20% to 50%, show Bloomberg data.

An FE compilation shows that 88 BSE 500 companies, other than banks and financial service providers, that reported their numbers so far have collectively reported substantial improvement in their profit margins. While the operating profit margin, at 17.1%, reported a y-o-y expansion of 111 bps on the back of a 5% contraction in raw material cost, net margin added 73 bps even as cumulative interest cost increased by 9.7% y-o-y.