Leading IT services provider
Cognizant Technology Solutions Corp. (
reported earnings of 92 cents that beat the Zacks Consensus
Estimate by a penny. Earnings per share ("EPS") jumped
17.9% year over year and 1.1% sequentially in the reported
quarter. The strong growth was primarily driven by an improving
Revenues jumped 17.1% year over year and 3.0% sequentially to
$1.95 billion, in line with the Zacks Consensus Estimate. The
strong year-over-year growth was primarily driven by solid
performance across all the segments.
Financial services (41.9% of total revenues) that include
insurance, banking, and transaction processing grew 3.4%
sequentially and 19.9% year over year to $815.4 million.
Healthcare (25.7% of total revenue) reported sequential growth of
3.5% and year-over-year growth of 9.4% and reached $500.1 million
in the quarter.
Retail/manufacturing/logistics (21% of total revenue)
continued to post strong growth in the quarter. Revenues jumped
28.2% year over year and 3.1% quarter over quarter to $408.7
million. Other revenues, which include sales from
service-oriented industries like communications, media and high
tech, were $224.0 million, up 7.7% from the year-ago quarter and
almost flat on a sequential basis.
Region wise, revenues from North America increased 15.7% year
over year and 2.1% sequentially to $1.54 billion, representing
78.8% of total revenues. Europe contributed 16.8% of total
revenues, which surged 19.0% year over year and 7.8% quarter over
quarter to $326.2 million. The remaining 4.4% of total revenues
came from the Rest of the World as sales jumped 38.4% from the
year-ago quarter and 2.1% from the previous quarter to $86.1
Operating margin (including stock-based compensation) came in
at 18.3% versus 18.8% in the previous quarter and 18.5% in the
year-ago quarter. The contraction in operating margin was
primarily due to 20 basis points expansion in operating expenses
as a percentage of revenues.
Cognizant ended the quarter with cash and cash equivalents of
$1.57 billion, up from $1.30 billion at the end of the previous
For first quarter of 2013, Cognizant forecasts revenues of at
least $2.0 billion and expects EPS of $1.01. Cognizant expects
revenues to increase 17% year over year to at least $8.60 billion
that includes $90.0 million from acquisitions. The company
forecasts EPS of $4.31 for the full year.
Although Cognizant reported a better-than-expected fourth
quarter, operating margin contraction will remain a concern going
forward. Moreover, Cognizant's full year guidance reflects
sluggish revenue growth amid a volatile macro-economic
environment, which may hurt profitability in the near term.
Nevertheless, we believe that Cognizant, which competes with
the likes of
Infosys Technologies (
Wipro Ltd. (
, remains well diversified in key verticals such as financial
services, health care & life sciences, retail, manufacturing
and logistics, which will continue to boost its top line.
Currently, Cognizant has a Zacks Rank #3 (Hold).
ACCENTURE PLC (ACN): Free Stock Analysis
COGNIZANT TECH (CTSH): Free Stock Analysis
INFOSYS LTD (INFY): Free Stock Analysis
WIPRO LTD-ADR (WIT): Free Stock Analysis
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