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Cognizant (CTSH) Q2 Earnings Beat Estimates, Revenues Up Y/Y

Cognizant Technology Solutions Corp.CTSH reported second-quarter 2018 non-GAAP earnings of $1.19 per share, which beat the Zacks Consensus Estimate of $1.10 and increased 28% from the year-ago quarter. The figure was better than management's expectation of $1.09 per share.

Revenues of $4.01 billion missed the Zacks Consensus Estimate of $4.02 billion. Nevertheless, the figure increased 9.2% year over year driven by growth in all the four domains. The figure was within the guided range of $4-$4.04 billion.

The company adopted ASC 606 (new revenue standard), which positively impacted revenues by $31 million, income from operations by $38 million and earnings by 5 cents per share.

Quarter Details

Segment-wise, Financial services (36.7% of revenues), which includes insurance, banking and transaction processing, grew 4.5% year over year to $1.47 billion.

Healthcare (28.9% of revenues) grew 10.1% year over year to $1.16 billion. Top-line growth can be attributed to steady demand across payer clients and increasing interest in the company's digital, analytics, cloud and virtualization solutions.

Products and Resources (21% of revenues) continued its growth momentum and improved 12.4% year over year to $840 million driven by growth in manufacturing and logistics clients.

Communications, Media and Technology (13.5% of revenues) were $541 million, up 15.8% from the year-ago quarter.

Region-wise, revenues from North America increased 7.6% year over year and represented 76.6% of total revenues. Europe revenues (17.2% of revenues) increased 19.2% from the year-ago quarter to $690 million. Rest of the World (6.2% of revenues) advanced 3.8% to $249 million.

Selling, general & administrative (SG&A) expenses, as a percentage of revenues, declined 110 basis points (bps) from the year-ago quarter to 20.1%.

Cognizant reported non-GAAP operating margin of 22%, which expanded 200 bps from the year-ago quarter.

In the quarter ended Jun 30, 2018, cash and cash equivalents (and short-term investments) were $4.25 billion, down from $4.83 billion reported as of Mar 31, 2018.

Cognizant Technology Solutions Corporation Price, Consensus and EPS Surprise

Cognizant Technology Solutions Corporation Price, Consensus and EPS Surprise | Cognizant Technology Solutions Corporation Quote

Guidance

For the third quarter of 2018, Cognizant expects revenues in the range of $4.06-$4.10 billion. Non-GAAP earnings are anticipated to be at least $1.13 per share. The Zacks Consensus Estimate for revenues and earnings is currently pegged at $4.12 billion and $1.14 per share, respectively.

For 2018, revenues are projected between $16.05 billion and $16.30.

Non-GAAP operating margin is expected to be roughly 21%. Non-GAAP earnings are projected to be at least $4.50 per share, up from the previous guidance of $4.47 per share.

The Zacks Consensus Estimate for revenues and earnings is currently pegged at $16.22 billion and $4.47 per share, respectively.

Zacks Rank & Stocks to Consider

Cognizant currently carries a Zacks Rank #3 (Hold).

Some other top-ranked stocks in the broader technology sector include Micron Technology MU , Amazon.com, Inc. AMZN and Apple Inc. AAPL . While Micron and Amazon sport a Zacks Rank #1 (Strong Buy), Apple carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks Rank #1 stocks here.

Long-term earnings growth rate for Micron, Amazon and Apple is projected to be 8.2%, 26.5% and 10.9%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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