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Cognizant (CTSH) Q3 Earnings and Revenues Beat Estimates
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Cognizant Technology Solutions (CTSH - Free Report) reported third-quarter 2020 non-GAAP earnings of 97 cents per share that beat the Zacks Consensus Estimate by 7.8%. However, the figure declined 46.1% from the year-ago quarter.
Third-quarter revenues of $4.24 billion beat the consensus mark by 2%. The figure declined 0.7% year over year at constant currency (cc).
Quarter Details
Segment-wise, Financial services (34.6% of revenues) declined 2.2% on a year-over-year basis at cc to $1.46 billion due to declines in both banking and insurance. Growth in regional banks and capital markets in North America was offset by weakness in select global banking accounts and in Europe.
Healthcare (29% of revenues) increased 4.2% year over year at cc to $1.23 billion, driven by increased revenues from life sciences. Growth in bio pharmaceutical clients and revenues from Zenith Technologies (acquired in July 2019) offset weakness in medical device clients. Within healthcare, performance among payer clients improved.
Cognizant Technology Solutions Corporation Price, Consensus and EPS Surprise
Products and Resources (21.8% of revenues) decreased 4.6% year over year at cc to $927 million due to decline in retail and consumer goods, and travel and hospitality clients affected by the coronavirus pandemic. This was partially offset by double-digit cc growth in manufacturing, logistics, energy and utilities.
Communications, Media and Technology revenues (14.5% of revenues) were $616 million, down 0.2% from the year-ago quarter at cc, hurt by the company’s decision to exit certain portions of its content services business.
Consulting & Technology services accounted for 62% of revenues. Outsourcing services contributed 38% of revenues. Additionally, 37% of Cognizant’s revenues were from fixed-price contracts.
Region-wise, revenues from North America decreased 1.4% year over year at cc and represented 74.9% of total revenues.
Revenues from Europe decreased 0.5% from the year-ago quarter at cc and accounted for 18.4% of total revenues. Rest of the World revenues rose 7.1% at cc and represented 6.6% of total revenues.
Operating Details
Selling, general & administrative (SG&A) expenses, as a percentage of revenues, expanded 230 basis points (bps) from the year-ago quarter to 18.9%.
Net headcount declined approximately 2.3% year over year, including roughly 10,000 associates exited under the Fit for Growth plan.
Quarterly annualized attrition was 18%, down 6% sequentially.
Cognizant reported non-GAAP operating margin of 15.9%, which contracted 140 bps year over year.
Balance Sheet
The company had cash and cash equivalents (and short-term investments) of $4.57 billion as of Sep 30, 2020, close to $4.58 billion as of Jun 30, 2020.
Cognizant generated $925 million in cash from operations compared with $979 million reported in the previous quarter.
Notably, the company has no significant debt maturities until 2023. As of Sep 30, 2020, the company had a total debt of $2.45 billion, which remained flat sequentially.
Free cash flow was $821 million compared with $886 million reported in the previous quarter.
Since the beginning of the third quarter through Oct 27, the company returned to shareholders over $700 million through share repurchases and $120 million in dividends.
Guidance
Full-year 2020 revenues are expected to be 16.7 billion, recording a decline on a cc basis of 0.4%.
The company expects adjusted operating margin to be around 15% in 2020.
The consensus mark for 2020 revenues is currently pegged at $16.5 billion, indicating a decline of 1.2% from the year-ago quarter.
Full-year 2020 adjusted earnings are expected to be in the range of $3.63-$3.67 per share.
Zacks Rank & Stocks to Consider
Cognizant currently carries a Zacks Rank #3 (Hold).
Q2 Holdings, Square and Covetrus are set to report their quarterly results on Nov 4, Nov 5 and Nov 10, respectively.
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Cognizant (CTSH) Q3 Earnings and Revenues Beat Estimates
Cognizant Technology Solutions (CTSH - Free Report) reported third-quarter 2020 non-GAAP earnings of 97 cents per share that beat the Zacks Consensus Estimate by 7.8%. However, the figure declined 46.1% from the year-ago quarter.
Third-quarter revenues of $4.24 billion beat the consensus mark by 2%. The figure declined 0.7% year over year at constant currency (cc).
Quarter Details
Segment-wise, Financial services (34.6% of revenues) declined 2.2% on a year-over-year basis at cc to $1.46 billion due to declines in both banking and insurance. Growth in regional banks and capital markets in North America was offset by weakness in select global banking accounts and in Europe.
Healthcare (29% of revenues) increased 4.2% year over year at cc to $1.23 billion, driven by increased revenues from life sciences. Growth in bio pharmaceutical clients and revenues from Zenith Technologies (acquired in July 2019) offset weakness in medical device clients. Within healthcare, performance among payer clients improved.
Cognizant Technology Solutions Corporation Price, Consensus and EPS Surprise
Cognizant Technology Solutions Corporation price-consensus-eps-surprise-chart | Cognizant Technology Solutions Corporation Quote
Products and Resources (21.8% of revenues) decreased 4.6% year over year at cc to $927 million due to decline in retail and consumer goods, and travel and hospitality clients affected by the coronavirus pandemic. This was partially offset by double-digit cc growth in manufacturing, logistics, energy and utilities.
Communications, Media and Technology revenues (14.5% of revenues) were $616 million, down 0.2% from the year-ago quarter at cc, hurt by the company’s decision to exit certain portions of its content services business.
Consulting & Technology services accounted for 62% of revenues. Outsourcing services contributed 38% of revenues. Additionally, 37% of Cognizant’s revenues were from fixed-price contracts.
Region-wise, revenues from North America decreased 1.4% year over year at cc and represented 74.9% of total revenues.
Revenues from Europe decreased 0.5% from the year-ago quarter at cc and accounted for 18.4% of total revenues. Rest of the World revenues rose 7.1% at cc and represented 6.6% of total revenues.
Operating Details
Selling, general & administrative (SG&A) expenses, as a percentage of revenues, expanded 230 basis points (bps) from the year-ago quarter to 18.9%.
Net headcount declined approximately 2.3% year over year, including roughly 10,000 associates exited under the Fit for Growth plan.
Quarterly annualized attrition was 18%, down 6% sequentially.
Cognizant reported non-GAAP operating margin of 15.9%, which contracted 140 bps year over year.
Balance Sheet
The company had cash and cash equivalents (and short-term investments) of $4.57 billion as of Sep 30, 2020, close to $4.58 billion as of Jun 30, 2020.
Cognizant generated $925 million in cash from operations compared with $979 million reported in the previous quarter.
Notably, the company has no significant debt maturities until 2023. As of Sep 30, 2020, the company had a total debt of $2.45 billion, which remained flat sequentially.
Free cash flow was $821 million compared with $886 million reported in the previous quarter.
Since the beginning of the third quarter through Oct 27, the company returned to shareholders over $700 million through share repurchases and $120 million in dividends.
Guidance
Full-year 2020 revenues are expected to be 16.7 billion, recording a decline on a cc basis of 0.4%.
The company expects adjusted operating margin to be around 15% in 2020.
The consensus mark for 2020 revenues is currently pegged at $16.5 billion, indicating a decline of 1.2% from the year-ago quarter.
Full-year 2020 adjusted earnings are expected to be in the range of $3.63-$3.67 per share.
Zacks Rank & Stocks to Consider
Cognizant currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector include Q2 Holdings, Inc. (QTWO - Free Report) , Square, Inc. (SQ - Free Report) and Covetrus, Inc. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Q2 Holdings, Square and Covetrus are set to report their quarterly results on Nov 4, Nov 5 and Nov 10, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>