Cognizant Technology Earnings: Double-Digit Growth, Investors Take Profits

S&P 500 (NYSE:SPY) component Cognizant Technology Solutions Corporation (NASDAQ:CTSH) reported net income above Wall Street’s expectations for the first quarter. Cognizant Technology Solutions provides custom IT consulting and technology services as well as outsourcing services for companies in North America, Europe, and Asia.

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Cognizant Technology Solutions Earnings Cheat Sheet for the First Quarter

Results: Net income for Cognizant Technology Solutions Corporation rose to $243.7 million (79 cents per share) vs. $208.3 million (67 cents per share) in the same quarter a year earlier. This marks a rise of 17% from the year-earlier quarter.

Revenue: Rose 24.8% to $1.71 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Cognizant Technology Solutions Corporation reported adjusted net income of 86 cents per share. By that measure, the company beat the mean estimate of 79 cents per share. Analysts were expecting revenue of $1.71 billion.

Quoting Management: “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 and revising our guidance to at least 20% revenue growth for 2012,” said Francisco D’Souza, Chief Executive Officer of Cognizant. “We continue to believe that we have the right portfolio of services to sustain our industry leading growth and also meet the changing demands in the market as clients continue to grapple with their dual mandates of cost containment and innovation/business transformation.”

Key Stats:
For the past five quarters, the company has seen double-digit year-over-year percentage revenue growth. Over that span, the company has averaged growth of 32.1%, with the biggest boost coming in the first quarter of the last fiscal year when revenue rose 42.9% from the year earlier quarter.
The company has now seen its net income rise for three quarters in a row. In the fourth quarter of the last fiscal year, net income rose 16.5% and in the third quarter of the last fiscal year, the figure rose 11.5%.

Cognizant Technology (NASDAQ:CTSH) has now topped analyst estimates for the last four quarters. It beat the mark by one cent in the fourth quarter of the last fiscal year, by 2 cents in the third quarter of the last fiscal year, and by one cent in the second quarter of the last fiscal year.

Gross margin shrank 0.5 percentage point to 42.5%. The contraction appeared to be driven by increased costs, which rose 25.9% from the year earlier quarter while revenue rose 24.8%.

Looking Forward: The average estimate for the second quarter remains unchanged at 83 cents a share. Over the past three months, the average estimate for the fiscal year has climbed from $3.41 per to share to $3.45.

Competitors to Watch: Intl. Business Machines Corp., iGATE Corporation, Syntel, Inc., Computer Sciences Corp., Infosys Tech. Ltd., Wipro Limited, CIBER, Inc., Edgewater Technology Inc., Virtusa Corporation, and Patni Computer Systems Ltd.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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