Leading IT services provider
Cognizant Technology Solutions Corp. (
reported earnings of 95 cents per share that beat the Zacks
Consensus Estimate by 3 cents.
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Earnings per share jumped 20.3% year over year and 3.3%
sequentially in the reported quarter. The strong growth was
primarily driven by an improving top line.
Revenues jumped 18.1% year over year and 3.7% sequentially to
$2.02 billion, in line with the Zacks Consensus Estimate.
The strong year-over-year growth was primarily driven by solid
performance across all the segments.
First quarter revenues included $8.2 million from the acquisition
of C1 Group.
Financial services (42.3% of revenues) that include insurance,
banking, and transaction processing grew 4.9% sequentially and
23.1% year over year to $855.3 million.
Healthcare (25.2% of revenues) reported sequential growth of 2.0%
and year-over-year growth of 9.1% to reach $510.0 million in the
Retail/manufacturing/logistics (21.1% of total revenue) continued
to post strong growth in the quarter. Revenues jumped 27.2% year
over year and 4.2% quarter over quarter to $425.8 million.
Other revenues, which include sales from service-oriented
industries like communications, media and high tech, were $229.5
million, up 7.0% from the year-ago quarter and 2.5% from the
Region wise, revenues from North America increased 16.3% year
over year and 3.0% sequentially to $1.58 billion, representing
78.3% of total revenue.
Europe contributed 17.2% of total revenue, which surged 22.7%
year over year and 6.7% quarter over quarter to $348.3 million.
The remaining 4.5% of total revenue came from the Rest of the
World as sales jumped 35.4% from the year-ago quarter and 4.8%
from the previous quarter to $90.3 million.
Selling, general & administrative expense as a percentage of
revenues declined 20 basis points ("bps") from the year-ago
quarter and 150 bps from the previous quarter to 20.4%.
Depreciation & amortization (D&A) as a percentage of
revenues climbed 10 bps from the year-ago quarter but remained
flat on a sequential basis.
Operating margin (including stock-based compensation) climbed 10
bps from the year-ago quarter but contracted 50 bps sequentially
Balance Sheet & Cash Flow
Cognizant ended the quarter with cash and cash equivalents of
$1.47 billion, down from $1.57 billion at the end of the previous
Cognizant's board of directors expanded its current share
repurchase program by $500.0 million to $1.5 billion and extended
the term of the program to Dec 31, 2014.
For the second quarter of 2013, Cognizant forecasts revenues of
at least $2.13 billion and expects earnings of $1.06 on a
For full year 2013, Cognizant expects revenues to increase at
least 17% year over year to $8.60 billion. The company forecasts
earnings of $4.31 per share for the full year.
Although Cognizant reported a better-than-expected first quarter,
operating margin contraction on a sequential basis will remain a
concern in the near term. Moreover, Cognizant's full year
guidance reflects sluggish revenue growth amid a volatile
macro-economic environment, which may hurt profitability in the
Additionally, the uncertainty surrounding the new immigration
reform bill is expected to remain a major overhang on Cognizant
Nevertheless, we believe that Cognizant, which competes with the
Infosys Technologies (
Wipro Ltd. (
, remains well diversified in key verticals and emerging markets
of social, mobile, analytics and cloud, which will continue to
boost its top line.
Currently, Cognizant has a Zacks Rank #3 (Hold).