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Cognizant Q2 Tops Estimates, Lifts FY12 Earnings View


Cognizant Technology Solutions Corp. (CTSH) reported Monday better-than expected profit and revenues for its second quarter, benefited by strong business in North America and Rest of the World regions. Going ahead, the provider of IT, consulting, and business process outsourcing services expects its third-quarter earnings to beat market estimates. The company also lifted its fiscal 2012 earnings forecast, while maintaining revenue view.

In pre-market activity, Cognizant shares increased $2.14 or 3.70 percent and are currently trading at $60.

Gordon Coburn, president, said, "Cognizant once again delivered industry leading growth despite a challenging macro-economic environment. This market downturn, as with those before, is serving as a catalyst for clients to embrace a broader range of our services."

For the second quarter, net income increased to $251.93 million or $0.82 per share from last year's $208.05 million or $0.67 per share. Excluding stock-based compensation expense, earnings per share rose to $0.88 from $0.72 a year earlier. The results included the impact of $0.02 in net non-operating foreign currency exchange loss.

On average, 24 analysts polled by Thomson Reuters expected earnings of $0.80 per share for the quarter. Analysts' estimates typically exclude one-time items.

Revenues climbed 20.9 percent to $1.795 billion, while analysts estimated revenues of $1.79 billion for the quarter. Revenue rose 4.9 percent sequentially.

Segment-wise, revenues from financial services climbed 20.3 percent and accounted for 41 percent of total revenues. Healthcare revenues grew 25.3 percent and revenues from manufacturing/retail/logistics segment increased 21.8 percent.

On a geographical basis, revenues from North America jumped 24.2 percent to $1.43 billion, and represented 80 percent of total revenues. Revenues from Europe increased 2.1 percent with good growth in UK, while rest of world's revenues surged 45.1 percent.

The company noted that its operating margin was 18.5 percent, and adjusted operating margin was 20 percent, in line with its targeted 19 to 20 percent range. In the last year, the margin was 18.2 percent.

Looking forward to the third quarter, Cognizant projects earnings of $0.86 per share and adjusted earnings of $0.92 per share with revenue of at least $1.875 billion. Analysts project earnings of $0.86 per share on $1.88 billion revenue for the quarter.

Further, for fiscal 2012, Cognizant currently expects earnings of at least $3.38 per share and adjusted earnings of $3.64 per share, higher than previously projected earnings of at least $3.36 per share and $3.62 per share, respectively.

However, the company continues to expect fiscal 2012 revenue to be at least $7.34 billion, at least 20 percent higher than a year ago.

Analysts estimate earnings of $3.37 per share and revenue of $7.34 billion for the full year.

Chief Financial Officer Karen McLoughlin stated, "We are pleased to maintain our full-year revenue guidance as we continue to execute as we expected. Our reaffirmed full-year revenue guidance includes absorbing more than $20 million of negative currency impacts during quarters two through four as a result of currency movements since we last provided guidance in early May."

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