November 7, 2012 / 2:36 PM / 5 years ago

Cognizant beats on demand from financial services, Europe

(Reuters) - IT outsourcing company Cognizant Technology Solutions Corp (CTSH.O) reported higher-than-expected quarterly results on strong demand from the financial services industry and Europe, and the company raised its full-year earnings forecast.

Revenue from financial services, Cognizant’s largest business, increased 20 percent in the third quarter.

“The ongoing economic challenges in Europe are beginning to act as a catalyst for longer-term outsourcing opportunities and broader acceptance of the global delivery model,” Cognizant President Gordon Coburn said on a conference call with analysts.

“Our European clients must run their businesses more efficiently ... We clearly expect to be a beneficiary of this trend.”

Demand from larger banking clients was particularly strong, he said.

Outsourcing by financial services companies is growing as banks and insurers try to cut costs to offset low interest rates and weak demand for loans.

Cognizant gets about 40 percent of its revenue from financial services clients such as JPMorgan Chase & Co (JPM.N), Rabobank RABOC.UL and UBS AG.

The company, which was founded in 1994 as a captive unit of Dun & Bradstreet (DNB.N) in India, has not missed analysts’ profit estimates for 15 quarters.

Shares of the company were up 4 percent in pre-market trading. They closed at $67.35 on Tuesday on the Nasdaq.

Cognizant said it now expects full-year earnings of at least $3.42 per share, up from its previous forecast of at least $3.38 per share. It reaffirmed its revenue forecast of $7.34 billion.

Analysts on average expect earnings of $3.39 per share on revenue of $7.34 billion, according to Thomson Reuters I/B/E/S.

IT services providers such as Cognizant, Accenture Plc (ACN.N), and India-based Tata Consultancy Services Ltd (TCS.NS) and Wipro Ltd (WIPR.NS) have benefited from a rise in demand for outsourcing as companies try to cut costs.

However, Accenture had said in September that spending on consulting will remain slow.

Net income rose to $276.9 million, or 91 cents per share, in the third quarter from $227.1 million, or 73 cents per share, a year earlier.

Excluding items, the company earned 97 cents per share.

Revenue rose to $1.89 billion from $1.60 billion a year earlier.

Analysts expected earnings of 87 cents per share on revenue of $1.88 billion.

Shares of the Teaneck, New Jersey-based company, most of whose employees are in India, have risen 5 percent since its second-quarter revenue topped that of rival Infosys Ltd (INFY.NS) on August 6.

Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Don Sebastian, Roshni Menon

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