Cognizant Beats by a Penny

Leading information technology services provider Cognizant Technology Solutions Corporation (CTSH - Analyst Report) reported revenues of $1.485 billion in the second quarter of 2011, up 34.4% from $1.105 billion in the second quarter of 201, beating the Zacks Consensus Estimate and management's expectation of at least $1.45 billion.

Net income came in at $208.0 million or $0.67 per diluted share compared to a net income of $172.2 million or $0.56 per diluted share in the year-ago quarter and a net income of $208.3 million or $0.67 per share in the previous quarter. This easily beat the Zacks Consensus Estimate of $0.66. Operating margin came in at 18.2%, down from 19.4% in the previous quarter.

Excluding stock-based compensation expenses of $23.7 million, Cognizant posted an operating margin of 19.8%, in line with management's targeted range of 19%−20%. During the quarter, Cognizant repurchased shares for $96 billion. Cognizant ended the quarter with cash and investments of $2.3 billion.

Going forward, management expects revenues of at least $1.57 billion in the third quarter of 2011. EPS is projected at $0.70. Excluding stock-based compensation expenses, EPS is forecasted at $0.76.

Cognizant now expects revenues of at least $6.06 billion, up from the previous estimate of $5.79 billion and up 32% year over year. EPS is likely to be at least $2.78, up from the earlier forecast of $2.63. Excluding $0.20 of estimated stock-based compensation expenses, EPS is forecasted at $2.98, up from the previous estimate of $2.91.

The guidance includes the anticipated four-month impact of the recently announced definitive agreement under which Cognizant will acquire CoreLogic Global Services Private Limited, the India-based captive operations of CoreLogic.

Cognizant remains well diversified among key verticals such as financial services, health care & life sciences, retail, manufacturing and logistics, which have helped it to maintain its top line. Expansion into new regions along with new processes represents a substantial opportunity for growth.

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