UPDATE 4-Cognizant results point to offshoring rebound

* Q3 adj EPS $0.48 vs est $0.41

* Q3 rev beats estimates

* Raises outlook for the year

* Q4 outlook beats estimates

* Shares up as much as 9 pct (Adds analyst comments, updates share movement)

By S. John Tilak

BANGALORE, Nov 3 (Reuters) - Cognizant Technology Solutions Corp's (CTSH.O) strong third-quarter results and full-year outlook boost suggest strength at its mainstay financial services business and a recovery in technology offshoring.

Shares of the IT services provider rose as much as 9 percent to $42.40 -- their highest in two years -- after it posted a profit that beat estimates for the third straight quarter and topped heightened revenue expectations from both Wall Street analysts and investors.

The news comes on the heels of an impressive display by its India-based rivals such as Tata Consultancy (TCS.BO), Infosys Technologies (INFY.BO) and Wipro (WIPR.BO).

Cognizant, which also offers business process outsourcing and consulting services, showed strong growth across all industry sectors and geographies.

"It's really a blowout quarter," Sanford C. Bernstein analyst Rod Bourgeois said. "It's literally in every segment of their business they've seen an uptick in demand."

The company was seeing a reinstatement of deals that were put on hold during the downturn, Bourgeois said.

Cognizant had a gross addition of 46 new customers in the third quarter.

The results reveal a rebound at financial services -- the company's biggest segment that contributed 43 percent to its third-quarter revenue -- and healthcare, another key segment.

"Within financial services, many of our key clients are indicating that the worst is over for IT spending reductions and are more positive about the prospects for their 2010 budgets," Chief Financial Officer Gordon Coburn said on a conference call.

The company's large exposure to financial services and North America saw its stock plummet to $14.38 at the peak of the global economic crisis in November 2008.

Financial services grew 7.4 percent in the third quarter. Healthcare was up 30 percent, accounting for 27 percent of total revenue.

Geographically, about 80 percent of its revenue comes from North America. A majority of Cognizant's 61,700 employees and development centers are located in India.

The results show "they are executing very well and macro conditions are getting better," Global Equities Research analyst Trip Chowdhry said.

"Cognizant will benefit disproportionately versus other competitors because of the breadth of services they offer."

'BLOWOUT QUARTER'

Third-quarter net income rose to $136.6 million, or 45 cents a share, from $112.8 million, or 38 cents a share, a year earlier. Excluding items, earnings were 48 cents a share. [ID:nWNAB8848]

Revenue rose 16 percent to $853.5 million.

Analysts expected earnings of 41 cents a share, excluding exceptional items, on revenue of $805.6 million, according to Thomson Reuters I/B/E/S.

For 2009, the company forecast earnings of $1.88 a share, excluding items, on revenue of at least $3.26 billion. It had earlier forecast earnings of at least $1.80 a share on revenue of at least $3.14 billion.

For the fourth quarter, the company forecast earnings of 49 cents a share, excluding items, on revenue of at least $880 million.

Analysts were looking for fourth-quarter earnings of 42 cents a share, excluding exceptional items, on revenue of $830.5 million.

"The outlook further into 2010 is contingent upon clients' budgets," Bourgeois said. "How far this rebound carries into 2010 is a to-be-determined question."

Shares of Cognizant, which also competes with larger players like Accenture (ACN.N), Hewlett-Packard (HPQ.N) and IBM (IBM.N), rose as much as $3.40, but pared some of the gains to trade up 6.7 percent at $41.40 on Nasdaq.

They have gained 28 percent in the last three months and 114 percent since the start of the year. (Reporting by S. John Tilak in Bangalore; Editing by Maju Samuel, Vinu Pilakkott, Saumyadeb Chakrabarty)