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Cognizant (CTSH) to Report Q2 Earnings: What's in Store?

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Cognizant Technology Solutions (CTSH - Free Report) is scheduled to report second-quarter 2022 results on Jul 27.

Second-quarter 2022 revenues are expected between $4.90 billion and $4.94 billion, indicating growth of 9.3-10.3% on a constant currency basis.

The Zacks Consensus Estimate for revenues is currently pegged at $4.92 billion, suggesting an increase of 7.34% from the year-ago quarter.

The consensus mark for first-quarter earnings has been unchanged at $1.09 per share over the past 30 days, suggesting year-over-year growth of 10.10%.

Cognizant beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 3.43%.

Factors to Note

Cognizant’s second-quarter 2022 performance is expected to have benefited from significant growth in its digital business operations, which is outgrowing the BPO market, reflecting momentum in AI, AR, automation, blockchain, IoT, quantum computing and as-a-service solutions.

The company has been building a strong partner base to develop solutions that bring digitization to industries, which have been slow in adopting digitization, automation and cloud services. Cognizant has been strategically partnering with tech giant Microsoft (MSFT - Free Report) to capitalize on the opportunity of intersection between health and cloud services.

Cognizant has collaborated with Microsoft to leverage their Cloud for Healthcare solution and built a new solution to aid in remote patient monitoring for improved medical care. This is expected to have aided Cognizant in earning market share in the healthcare industry and increasing revenue growth in the to-be-reported quarter.

CTSH’s second-quarter 2022 results are expected to reflect the positive effects of a healthy book-to-bill ratio of 1.2, as the delivery team met the demand with adequate supply despite unfavorable labor market conditions.

However, the company has reduced its constant currency outlook for revenues by 250 basis points to reflect rising volatility in foreign exchange due to geopolitical tensions and macroeconomic turmoil.

Compensation costs, which also include the cost of subcontractors, might have hurt Cognizant’s top line in the quarter to be reported. Industry supply chain constraints are expected to have negatively impacted the company’s growth in the to-be-reported quarter.

What Our Model Says

Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Cognizant has an Earnings ESP of -0.82% and a Zacks Rank #3 currently. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here is a company worth considering, as our model shows that it has the right combination of elements to beat on earnings in its upcoming release:

Ballard Power Systems (BLDP - Free Report) has an Earnings ESP of +1.40% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ballard’s shares have fallen 45.75% in the year-to-date period compared with the Zacks Electronics - Miscellaneous Components industry’s decline of 23.4%.

Aspen Technology (AZPN - Free Report) has an Earnings ESP of +1.40% and a Zacks Rank #2.

Aspen’s shares have returned 19% in the year-to-date period against the Zacks Internet - Software industry’s decline of 49.7%.

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