Cognizant Delivers Solid Quarter

Early in the day, Cognizant Technology Solutions Corporation (CTSH - Analyst Report) reported revenues of $853.5 million in the third quarter of 2009, up 16% from a year ago and up 10% sequentially. 

Management stated that the company experienced strong organic growth across all industry sectors, geographies and service lines in the reported quarter. Operating margin came in at 20.2%, in line with the company’s targeted range of 19% – 20% but slightly down from 20.8% in the previous quarter. 

Earnings per share (EPS) came in at 48 cents, easily beating the Zacks Consensus Estimate of 41 cents. The balance sheet looks healthy as ever. Cognizant exited the quarter with $1.1 billion in cash and equivalents, up from $983.2 million at the end of the previous quarter. 

Yesterday, rival Wipro Limited (WIT - Analyst Report) also reported solid results and beat expectations driven by strength in its IT services business. However, the company expects a sequential decline in the next quarter. 

Compared to its competitors, Infosys Technologies Ltd (INFY - Analyst Report) and Wipro, Cognizant is setting a more robust pace. Going forward, management expects revenues of at least $880 million in the fourth quarter of 2009, up 3% sequentially. Earnings per share are forecasted to be around 49 cents. 

For full fiscal 2009, management expects revenues around $3.255 billion, up 15% from a year ago. Earnings per share are expected around $1.88. 

Cognizant remains well diversified among verticals such as financial services, health care and life sciences, retail, manufacturing and logistics. This diversification has helped the company maintain its top line even in this tough economic climate. Earlier in the month, Cognizant announced that it will acquire agreement to acquire UBS India Service Centre Private Limited for about $75 million. Based in India, UBS is a captive service provider to UBS AG and currently employs 2,000 associates. 

Apart from making good use of its strong cash balance, management at Cognizant believes that this acquisition will help the company strengthen its business and knowledge process capabilities, besides improving its capabilities to provide integrated services across consulting, technology, and outsourcing. 

The company has consistently delivered solid results maintaining both top and bottom lines. Given the early signs of economic recovery, we expect growth to accelerate in the coming quarters. Headquartered in Teaneck, New Jersey, Cognizant Technology Solutions Corporation is a leading provider of custom information technology for Fortune 1000 customers.