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Cognizant (CTSH) to Report Q1 Earnings: What's in Store?

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Cognizant Technology Solutions (CTSH - Free Report) is set to report first-quarter 2021 results on May 5.

First-quarter 2021 revenues are expected to be in the range of $4.34-4.38 billion, indicating growth of 1%-2% on a cc basis. The Zacks Consensus Estimate for revenues is currently pegged at $4.36 billion, indicating an increase of 3.2% from the figure reported in the year-ago quarter.

The consensus mark for first-quarter earnings has remained unchanged at 94 cents per share over the past 30 days. The estimate suggests a year-over-year decline of 2.08%.

Notably, the company beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing in one, the average surprise being 1.79%.

Let’s see how things have shaped up prior to the upcoming announcement.

Factors to Consider

Cognizant’s quarterly results are likely to reflect its domain expertise in areas like automation, digital engineering, cloud and IoT. Moreover, stellar demand for digital transformation across enterprises is anticipated to have fueled growth in the company’s digital bookings.

Steady adoption of digital engineering, cloud infrastructure, IoT, AI and analytics solutions is expected to have driven the company’s product and resource revenues during the to-be-reported quarter.

Further, the company’s solid partner base, which includes Salesforce (CRM - Free Report) , Workday (WDAY - Free Report) , Oracle (ORCL - Free Report) , SAP and ServiceNow is likely to have helped the company provide a complete suite of enterprise application services to its clients, thereby aiding client wins during the December-end quarter.

On Feb 1, 2021 Cognizant announced the completion of the acquisition of Magenic Technologies, a privately-held custom software development services company headquartered in Minneapolis, MN. The acquisition expands Cognizant’s software product engineering footprint, adding 475 employees in the United States across seven locations, and more than 350 employees in Manila, Philippines.

Moreover, the company also completed the acquisition of Linium, a cloud transformation consultancy group specializing in the ServiceNow platform and solutions for smart digital enterprise workflows.

Apart from this, the company pursued several acquisitions, including Bright Wolf, Tin Roof Software, 10th Magnitude and Zenith Technologies, to strengthen its digital capabilities, which is likely to have been a major positive during the quarter in discussion.

Additionally, the communications, media and technology segment is likely to have benefited from steady demand for digital engineering services. Nonetheless, the segment’s top-line results might underline the negative impact of the exit from certain portions of the content services business, and prevalent pressure in the media and entertainment.

Furthermore, steady demand for digital operations and cloud-based environments is likely to have aided Life Sciences in the to-be-reported quarter. Also, strong demand from biopharma customers, along with contribution from Zenith’s acquisition, is likely to have aided the top line in the healthcare segment.

However, reduced client demand, primarily in the travel and hospitality industries hit by the coronavirus-led restrictions, might have thwarted top-line growth for this Zacks Rank #4 (Sell) company in the soon-to-be-reported quarter.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, weakness across select global banking accounts is expected to have dampened growth in the financial services segment.

Key Developments in Q1

On Mar 25, Cognizant announced that it has entered into an agreement to acquire Germany-based ESG Mobility, a digital automotive engineering research & development provider for connected, autonomous and electric vehicles.

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