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Cognizant Technology Solutions Corp. (CTSH - Analyst Report) is set to report first-quarter 2014 results on May 7. Last quarter, the company posted a 3.9% positive surprise. The company has posted an average positive earnings surprise of 4.1% over the past four quarters. Year-to-date, Cognizant’s share price has decreased 0.3% compared with 2.9% in the S&P 500.

Let’s see how things are shaping up for the first quarter:

Growth Factors this Past Quarter

We believe that Cognizant, which competes with the likes of Accenture (ACN - Analyst Report), Infosys (INFY - Analyst Report) and Wipro Ltd. (WIT - Snapshot Report), remains well diversified in key verticals and emerging markets of social, mobile, analytics and cloud, which will continue to boost its top line.

Increasing off-shoring will drive Cognizant’s results in the near term. Cost efficiency amid tight IT spending budget well positions the company to grow in the near term. However, increasing headcount may hurt profitability.

Earnings Whispers?

Our proven model does not conclusively show that Cognizant is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP for Cognizant stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 55 cents.

Zacks Rank: Cognizant has a Zacks Rank #3 (Hold) which when combined with 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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