Leading information technology services provider
Cognizant Technology Solutions Corporation
(
CTSH
) posted a net income of $276.9 million or 91 cents per share in
the third quarter of 2012, which compared favorably with a net
income of $251.9 million or 82 cents per diluted share in the
second quarter of 2012 and a net income of $227.1 million or 73
cents per diluted share in the year-ago quarter.
Earnings per share of 91 cents in the quarter surpassed the
Zacks Consensus Estimate of 87 cents and also management's
expectation of 86 cents.
Revenues
Cognizant reported revenues of $1.892 billion in the third
quarter of 2012, up 18.2% year over year and 5.4%
sequentially.
In particular, growth from newer service offerings of
Consulting, Business Process Outsourcing and IT Infrastructure
Services were strong and contributed 20% to the top
line.
Segment wise, the financial services segment -- including
insurance, banking, and transaction processing -- grew 7.0%
sequentially and 20.2% year over year. This segment represented
41.7% of the total revenue in the quarter.
Healthcare posted sequential decline of 0.2% but a 12.4%
year-over-year growth, accounting for 25.5% of the total revenue
in the quarter.
Retail manufacturing logistics were once again strong, with a
10.9% sequential and 27.9% year-over-year growth, and contributed
21.0% of total revenue during the quarter.
The remaining 11.8% of revenues came from other
service-oriented industries like communications, media and high
tech, which grew 3.8% sequentially and 8.9% year over year.
Margins
Operating margin came in at 18.8% versus 18.5% in the previous
quarter and 18.3% in the year-ago quarter. Cognizant ended the
quarter with cash and investments of $1.3 billion, up from $1.0
billion at the end of the previous quarter.
Guidance
Going forward, management expects revenues of at least $1.94
billion in the fourth quarter of 2012. EPS is likely to be 91
cents in fourth quarter 2012. Excluding stock-based compensation
expense, EPS is forecasted at 97 cents in the fourth quarter of
2012.
Cognizant reiterated its revenue guidance for 2012. For the
full year 2012, management continues to expect revenues to rise
at least 20% annually to $7.34 billion. Growth from newer
services is expected to be strong. EPS is likely to be $3.42, up
from the previous estimate of $3.38. Excluding stock-based
compensation expense, EPS is forecasted at $3.69, up from the
earlier forecast of $3.64.
Our Recommendation
Cognizant, which competes with the likes of
Infosys Technologies
(
INFY
) and
Wipro Ltd.
(
WIT
), remains well diversified among key verticals such as financial
services, health care & life sciences, retail, manufacturing
and logistics, which continue to boost its top line.
We continue to maintain a Neutral recommendation on Cognizant.
Our recommendation is supported by a Zacks #3 Rank, which
translates into a short-term Hold rating.
COGNIZANT TECH (CTSH): Free Stock Analysis
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