February 7, 2018 / 11:17 AM / 10 months ago

Cognizant results top estimates as healthcare clients spend more

(Reuters) - Cognizant Technology Solutions Corp’s (CTSH.O) fourth-quarter profit and revenue beat analysts’ estimates and the IT services firm gave an upbeat forecast for the first quarter, as healthcare and financial clients increased spending.

The Cognizant logo is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada October 19, 2017. REUTERS/Chris Helgren

Teaneck, New Jersey-based Cognizant has been spending heavily to bolster its digital services, a strategy that has driven much of its revenue in recent years.

Cognizant’s shares rose 7 percent on Wednesday morning to a record high of $78.99.

Its total revenue rose 10.6 percent to $3.83 billion, edging past analysts’ average estimate of $3.82 billion, according to Thomson Reuters I/B/E/S.

The company said revenue from the healthcare sector rose 12 percent in the fourth quarter ended Dec. 31, while financial services revenue climbed 5.4 percent.

Most of Cognizant’s revenue comes from these two industries, but while financial services form a bigger chunk, healthcare has grown faster over the past year.

The company has invested substantially in key healthcare products including its TriZetto software suite. Last year, it acquired TMG Health, a large provider of IT services for government-sponsored health plans.

“Healthcare is an area of deep strength at Cognizant ... I continue to feel very confident that we have a very strong position in that market,” Chief Executive Francisco D’Souza said in an interview.

D’Souza said Cognizant was also benefiting from winning larger-scale projects.

Separately, Cognizant on Wednesday announced a new non-profit to support science, technology, engineering and mathematics education for U.S. workers and students. The company will make an initial grant of $100 million to the foundation.

The IT firm also said it would hire at least 25,000 more workers in the United States over the next five years. Some 72 percent of Cognizant’s over 260,000 employees were based in India as of 2016-end.

Cognizant forecast revenue of $3.88 billion to $3.92 billion for the first quarter ending March. Analysts were expecting $3.88 billion.

The company recorded a net loss of $18 million in the fourth quarter compared to a net income of $416 million a year earlier. Results included a one-time expense of $617 million related to new U.S. tax laws.

Excluding one-time items, Cognizant earned $1.03 per share, topping analysts’ expectations of 97 cents per share.

Reporting by Arjun Panchadar and Supantha Mukherjee in Bengaluru; Editing by Sai Sachin Ravikumar

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