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Cognizant Trims 2012 Forecast, Despite Higher Q1 Profit

Cognizant Trims 2012 Forecast, Despite Higher Q1 Profit
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5/7/2012 7:33 AM ET

Cognizant Technology Solutions Corp. (CTSH: Quote) reported Monday a higher profit for its first quarter as revenues surged with double-digit growth in all regions and segments. The IT, consulting, and BPO services provider, meanwhile, trimmed its fiscal 2012 forecast citing slower than anticipated acceleration in demand. The company also announced an additional $400 million share buyback program. The shares declined around 7% in pre-market activity on Nasdaq.

President Gordon Coburn said, "Our solid performance this quarter validates our strategy of continually reinvesting in our business to broaden and strengthen our service offerings. We continue to have a healthy long-term outlook for the business."

Peers Wipro Ltd. (WIT: Quote) and Infosys Technologies Ltd (INFY: Quote) in late April reported higher profit and revenues for their respective fourth quarters. Wipro, meanwhile, continues to project sequentially flat IT Services revenues for its first quarter, while Infosys issued a weak full year guidance, warning of challenges ahead amid a tough economy.

For its first quarter, Cognizant's net income grew to $243.65 million or $0.79 per share from last year's $208.33 million or $0.67 per share. Adjusted earnings per share advanced to $0.86 from $0.71 a year earlier. On average, 24 analysts polled by Thomson Reuters expected earnings of $0.79 per share for the quarter. Analysts' estimates typically exclude one-time items.

Revenue climbed 24.8 percent to $1.71 billion from $1.37 billion last year and came in line with 21 analysts' consensus estimate.

Segment-wise, revenues from financial services were 21.9 percent higher than last year and represented 40.6 percent of total revenues. In the quarter, revenues from healthcare and manufacturing/retail/logistics also climbed.

On a geographical basis, 79.5 percent of total revenues came from North America, totaling $1.36 billion, a growth of 27.2 percent from last year. Total European revenues increased 11 percent and revenues from rest of world surged 46.9 percent.

Adjusted operating margin was 20.4 percent, slightly higher than the company's targeted 19-20 percent range, but lower than prior year's 20.5 percent.

Looking forward to the second quarter of 2012, the company projects earnings per share to be $0.80 and adjusted earnings per share to be $0.87, with revenue anticipated to be at least $1.79 billion. Analysts project earnings of $0.83 per share on $1.84 billion revenue for the quarter.

For fiscal 2012, Cognizant now projects earnings per share to be at least $3.36 and adjusted earnings per share at $3.62. Revenue is now expected to be at least $7.34 billion, up at least 20 percent. Analysts estimate earnings per share of $3.45 and revenue of $7.54 billion for the full year.

Cognizant's Chief Executive stated, "Due to a slower than anticipated acceleration in demand as we entered the second quarter, we are adopting a more conservative stance for the remainder of the year."

Earlier, the company forecasted earnings per share of at least $3.43 and adjusted earnings per share of $3.69 with 2012 revenue anticipated to be at least $7.53 billion, a growth of at least 23 percent from 2011.

Further, the company said its board has authorized to expand its existing share repurchase program by $400 million to $1 billion. The board has also extended the expiration date to December 31.

In pre-market activity, Cognizant shares are currently trading at $64.97, down $4.69 or 6.73 percent.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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