August 3, 2017 / 10:18 AM / 2 years ago

Cognizant shrugs off healthcare worry, tightens FY revenue view

(Reuters) - Cognizant Technology Solutions Corp raised the lower end of its 2017 revenue forecast, easing concerns of tighter spending from its healthcare clients amid uncertainty surrounding the U.S. healthcare policy.

The healthcare sector’s worry has been taking a toll on IT services providers lately, forcing them to give bleak forecasts.

The Republican quest to scrap Obamacare, a major campaign vow by U.S. President Donald Trump, failed last week, after the Senate failed to dismantle the healthcare law.

Cognizant gets a large chunk of its revenue from financial services and healthcare clients.

However, Chief Executive Francisco D’Souza told Reuters the heavy investments in healthcare have been paying off and the company expected to see continued demand from the sector.

Revenue from healthcare services rose 9.5 percent to $1.05 billion in the second quarter.

Teaneck, New Jersey-based Cognizant raised its lower-end of full-year revenue forecast to $14.70 billion from 14.56 billion.

The IT service provider now expects its 2017 revenue to be between $14.70 billion and $14.84 billion.

Analysts on average were expecting revenue of $14.76 billion, according to Thomson Reuters I/B/E/S.

“The investments are really paying off, creating strong growth in the first half of the year, which gives us the confidence to take our guidance up for the full year,” Chief Executive Francisco D’Souza told Reuters.

The company also reported a better-than-expected profit and revenue for the quarter, as its efforts to boost its digital services paid off.

Cognizant’s net income rose 86.5 percent to $470 million in the second quarter ended June 30, as the IT services provider benefited from lower income tax compared with the year-ago period.

Cognizant said its subsidiary in India repurchased shares valued at $2.8 billion from its shareholders in May last year.

As a result of the transaction, the company said it took an income tax expense of $190 million in the year-ago period.

Excluding items, the company earned 93 cents per share, beating the analysts’ estimate of 90 cents.

Revenue rose nearly 9 percent to $3.67 billion, slightly above the average analysts’ estimate of $3.66 billion.

The company said it expected current-quarter revenue to be between $3.73 billion to $3.78 billion, largely in line with the average analysts’ estimate of $3.76 billion, according to Thomson Reuters I/B/E/S.

Shares of the company, which gained nearly 23 percent this year, were slightly up on Thursday.

Reporting by Rishika Sadam in Bengaluru; Editing by Arun Koyyur

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