Cognizant Technology Solutions 1Q Adjusted EPS Beats, But Revenue Miss, Offers Tepid Outlook

Cognizant Technology Solutions Corporation CTSH revealed net income of $441.2 million for the first quarter representing 15.2% growth from the year-ago quarter's $382.9 million. Similarly, its earnings grew 16.13% to $0.72 a share from $0.62 a share in the corresponding quarter of the last year. Excluding special items, Cognizant Technology said that its earnings would have witnessed 12.7% growth to $0.80 a share from $0.71 a share for the period under review. That meant its earnings topped by a penny. The company's top line advanced 10% to $3.2 billion from $2.91 billion in the previous year quarter. However, that came modestly below the Street analysts' estimations of $3.23 billion. Cognizant's CEO, Franciso D'Souza, commented about the results indicating, "Overall, our first quarter results were in line with our expectations and guidance. Client demand for our digital expertise, services and technologies remains strong. We continue to see positive returns from our extensive strategic investment in disruptive technologies, new digital business models and best-in-class delivery capabilities. We believe our strong fundamentals have positioned us well to be the transformation partner of choice for our clients." Its President, Gordon Coburn, joined to say, "As anticipated, during the first quarter we saw softness in our healthcare segment due to M&A activity, as well as softness in our banking segment due to financial market volatility. As we move into the second quarter, we are quite pleased with our momentum with new and existing clients, which we expect to drive sequential revenue growth in the second quarter of $140 to $200 million. To support this expected growth, we significantly accelerated hiring during the first quarter and increased our global headcount by 11,300 employees." Going forward, the company expects adjusted earnings to be $0.80 - $0.82 a share on revenues of $3.34 - $3.4 billion for the second quarter. The guidance was below the Street expectations of $0.84 a share on revenues of $3.41 billion. For the full year 2016, Cognizant expects adjusted earnings between $3.32 and $3.44 a share on revenues of $13.65 - $14.0 billion. The mid-point was lower than the analysts' predictions of $3.39 a share on revenue of $13.9 billion. In the pre-market trading on Friday, the stock was down 1.02%.