Cognizant Technology Solutions Corp. (CTSH - Free Report) delivered first-quarter 2018 non-GAAP earnings of $1.06 per share, which beat the Zacks Consensus Estimate by a penny and surged 26.2% from the year-ago quarter. The figure was better than management’s expectation of $1.04 per share.
Revenues of $3.91 billion surpassed the Zacks Consensus Estimate and improved 10.3% year over year driven by growth in all the four domains. The figure was within management’s guidance of $3.88-$3.92 billion.
The company adopted ASC 606 (new revenue standard), which positively impacted revenues by $21 million, income from operations by $29 million and earnings by 4 cents per share.
Quarter Details
Segment-wise, Financial services (37.3% of revenues), which includes insurance, banking and transaction processing, grew 6.2% year over year to $1.46 billion. The segment was driven by growth in insurance companies and mid-tier banks, which mitigated the softness arising from legacy businesses.
Healthcare (28.7% of revenues) grew 11.8% year over year to $1.12 billion. Top-line growth can be attributed to steady demand across payer clients and increasing interest in the company’s digital, analytics, cloud and virtualization solutions.
Products and Resources (21% of revenues) continued its growth momentum and improved 11.4% year over year to $821 million driven by growth in manufacturing and logistics clients.
Communications, Media and Technology (13% of revenues) were $494 million, up 19% from the year-ago quarter.
Digital revenues grew 27% year over year and was 29% of total revenues in the reported quarter. Moreover, Cognizant added seven new strategic customers during the quarter, bringing total to 364.
Further, Consulting & Technology services revenues were up 10.7% year over year. Moreover, outsourcing services revenues increased 9.7% from the year-ago quarter.
Additionally, roughly 39% of Cognizant’s revenues were from fixed price contracts.
Region-wise, revenues from North America increased 7.8% year over year and represented 76% of total revenues. Europe revenues (17.5% of revenues) surged 22.4% from the year-ago quarter to $684 million. Rest of the World (6.5% of revenues) advanced 11.9% to $253 million.
Selling, general & administrative (SG&A) expenses, as a percentage of revenues, declined 120 basis points (bps) from the year-ago quarter to 18.2%. Headcount increased by 1,400 sequentially to 261,400.
Cognizant reported non-GAAP operating margin of 20.3%, which expanded 140 bps from the year-ago quarter.
In the quarter ended Dec 31, 2017, cash and cash equivalents (and short-term investments) were $4.83 billion, up from $5.06 billion reported as of Dec 31, 2017.
Guidance
For the second quarter of 2018, Cognizant expects revenues in the range of $4-$4.04 billion. Non-GAAP earnings are anticipated to be at least $1.09 per share. The Zacks Consensus Estimate for revenues and earnings are currently pegged at $4.02 billion and $1.12 per share, respectively.
For 2018, revenues are projected between $16.05 billion and $16.30 billion slightly narrower than the previous guidance of $16.00-$16.30 billion.
Non-GAAP operating margin is expected to be roughly 21%. Non-GAAP earnings are projected to be at least $4.47 per share, down from previous guidance of $4.53 per share.
The Zacks Consensus Estimate for revenues and earnings are currently pegged at $16.21 billion and $4.53 per share, respectively.
Cognizant remains on track to achieve 22% non-GAAP operating margins in 2019.
Zacks Rank & Other Stocks to Consider
Cognizant has a Zacks Rank #2 (Buy).
Autohome (ATHM - Free Report) , Nice (NICE - Free Report) and Etsy (ETSY - Free Report) are other stocks worth considering in the broader computer and technology sector. While Etsy carries a Zacks Rank #2, both Autohome and Nice sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Both Autohome and Etsy are set to report their first-quarter 2018 results on May 8. Nice is slated to report first-quarter 2018 results on May 10.
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Cognizant Technology Solutions Corp. (CTSH - Free Report) delivered first-quarter 2018 non-GAAP earnings of $1.06 per share, which beat the Zacks Consensus Estimate by a penny and surged 26.2% from the year-ago quarter. The figure was better than management’s expectation of $1.04 per share.
Revenues of $3.91 billion surpassed the Zacks Consensus Estimate and improved 10.3% year over year driven by growth in all the four domains. The figure was within management’s guidance of $3.88-$3.92 billion.
The company adopted ASC 606 (new revenue standard), which positively impacted revenues by $21 million, income from operations by $29 million and earnings by 4 cents per share.
Quarter Details
Segment-wise, Financial services (37.3% of revenues), which includes insurance, banking and transaction processing, grew 6.2% year over year to $1.46 billion. The segment was driven by growth in insurance companies and mid-tier banks, which mitigated the softness arising from legacy businesses.
Healthcare (28.7% of revenues) grew 11.8% year over year to $1.12 billion. Top-line growth can be attributed to steady demand across payer clients and increasing interest in the company’s digital, analytics, cloud and virtualization solutions.
Products and Resources (21% of revenues) continued its growth momentum and improved 11.4% year over year to $821 million driven by growth in manufacturing and logistics clients.
Communications, Media and Technology (13% of revenues) were $494 million, up 19% from the year-ago quarter.
Digital revenues grew 27% year over year and was 29% of total revenues in the reported quarter. Moreover, Cognizant added seven new strategic customers during the quarter, bringing total to 364.
Further, Consulting & Technology services revenues were up 10.7% year over year. Moreover, outsourcing services revenues increased 9.7% from the year-ago quarter.
Additionally, roughly 39% of Cognizant’s revenues were from fixed price contracts.
Region-wise, revenues from North America increased 7.8% year over year and represented 76% of total revenues. Europe revenues (17.5% of revenues) surged 22.4% from the year-ago quarter to $684 million. Rest of the World (6.5% of revenues) advanced 11.9% to $253 million.
Selling, general & administrative (SG&A) expenses, as a percentage of revenues, declined 120 basis points (bps) from the year-ago quarter to 18.2%. Headcount increased by 1,400 sequentially to 261,400.
Cognizant reported non-GAAP operating margin of 20.3%, which expanded 140 bps from the year-ago quarter.
In the quarter ended Dec 31, 2017, cash and cash equivalents (and short-term investments) were $4.83 billion, up from $5.06 billion reported as of Dec 31, 2017.
Guidance
For the second quarter of 2018, Cognizant expects revenues in the range of $4-$4.04 billion. Non-GAAP earnings are anticipated to be at least $1.09 per share. The Zacks Consensus Estimate for revenues and earnings are currently pegged at $4.02 billion and $1.12 per share, respectively.
For 2018, revenues are projected between $16.05 billion and $16.30 billion slightly narrower than the previous guidance of $16.00-$16.30 billion.
Non-GAAP operating margin is expected to be roughly 21%. Non-GAAP earnings are projected to be at least $4.47 per share, down from previous guidance of $4.53 per share.
The Zacks Consensus Estimate for revenues and earnings are currently pegged at $16.21 billion and $4.53 per share, respectively.
Cognizant remains on track to achieve 22% non-GAAP operating margins in 2019.
Zacks Rank & Other Stocks to Consider
Cognizant has a Zacks Rank #2 (Buy).
Autohome (ATHM - Free Report) , Nice (NICE - Free Report) and Etsy (ETSY - Free Report) are other stocks worth considering in the broader computer and technology sector. While Etsy carries a Zacks Rank #2, both Autohome and Nice sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Both Autohome and Etsy are set to report their first-quarter 2018 results on May 8. Nice is slated to report first-quarter 2018 results on May 10.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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