August 3, 2010 / 10:33 AM / 9 years ago

UPDATE 3-Cognizant profit tops estimates, outshines rivals

* Q2 EPS $0.56 vs est $0.52

* Seeing strength across all segments, regions

* Sees 2010 sales up at least 36 pct from last year

* Shares up 11 pct premarket (Adds analyst comment, updates stock movement)

By S. John Tilak

BANGALORE, Aug 3 (Reuters) - Cognizant Technology Solutions Corp (CTSH.O) reported a profit that topped market estimates for the sixth straight quarter, helped by a surge in discretionary projects, and raised its 2010 revenue outlook well above what the Wall Street was looking for.

The Teaneck, New Jersey-based IT services provider outperformed its larger India-based rivals, pushing its shares up 5 percent in trading before the bell.

The company saw robust spending from clients across all its business segments and geographies.

“This report from Cognizant is resounding evidence that the offshore services market is thriving and that Cognizant’s share-gaining prowess is remaining in full gear,” Sanford C. Bernstein analyst Rod Bourgeois said.

Tata Consultancy (TCS.BO), Infosys Technologies (INFY.BO) and Wipro (WIPR.BO) posted low- to mid-single-digit sequential revenue growth in the June quarter, the analyst noted.

Cognizant’s second-quarter revenue was $1.11 billion, up 42 percent from the previous year and 15 percent sequentially.

“The rising tide is clearly lifting all boats. But Cognizant’s growth rate is particularly spectacular,” Kaufman Bros analyst Karl Keirstead said.

“It’s pretty clear that the Indian outsourcing sector is on fire.”

The results show that the company’s financial services customers, the worst hit during the recession, are starting to spend again.

Financial services, the company’s biggest segment, contributed 41.5 percent to first-quarter revenue. [ID:nSGE6710K3]

Cognizant attributed part of the rise in discretionary spending to pent-up demand from projects deferred last year.

For 2010, the company forecast earnings of at least $2.42 a share, excluding items, on revenue of at least $4.46 billion, or up at least 36 percent from a year ago.

The revenue outlook, a key metric the Wall Street looks for in Cognizant, is up from the company’s earlier forecast of at least 25 percent.

“The results, quite frankly, exceeded the most optimistic of Street expectations,” Keirstead said.

Second-quarter net income rose to $172.2 million, or 56 cents a share, from $141.3 million, or 47 cents a share, a year earlier.

Analysts expected earnings of 52 cents a share, on revenue of $1.02 billion, according to Thomson Reuters I/B/E/S.

Shares of Cognizant were up $6.06 at $61.48 Tuesday before the bell. They closed at $55.42 Monday on Nasdaq.

Cognizant shares have gained 81 percent in the last 52 weeks, outperforming a 12 percent rise in the broader S&P 500 .SPX Index. (Reporting by S. John Tilak; Editing by Vinu Pilakkott)

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