Back to top

Image: Shutterstock

Cognizant (CTSH) Appoints New CEO, Updates Q4 & 2022 View

Read MoreHide Full Article

Cognizant Technology Solutions (CTSH - Free Report) shares jumped 5.85% to close at $65.10 on Jan 12 after it announced the appointment of Ravi Kumar as the CEO and a member of the board, replacing Brian Humphries in both roles, effective immediately. Brian Humphries will remain with Cognizant as a special advisor until Mar 15, 2023.

Cognizant also updated its previously provided guidance for the fourth quarter and 2022. The company raised its top-line expectations but lowered its operating margin and adjusted earnings guidance.

Ravi Kumar recently served as president at Infosys until October 2022, leading Infosys Global Services Organization across all global industry segments.

Cognizant also appointed Surya Gummadi as the president of Cognizant Americas, for which it had initially selected Ravi Kumar.

Moreover, Cognizant announced that Stephen J. Rohleder, a member of Cognizant’s board since March 2022, has been elected chair of the board.

Cognizant Riding on Acquisitions & Partnerships

Cognizant shares have dropped 25.3% in the past year, outperforming the Zacks Computer and Technology sector’s fall of 29% over the same time frame.

Revenue-accretive acquisitions like OneSource Virtual, Utegration, and AustinCSI, as well as an expanding partner base that includes the likes of Microsoft (MSFT - Free Report) , have been the key catalysts.

OneSource Virtual is a leading provider of Workday (WDAY - Free Report) services, solutions and products, while Utegration LLC is a full-service consulting and solutions provider, specializing in SAP’s (SAP - Free Report) technology and SAP-certified products for the energy and utilities sectors.

AustinCSI strengthens Cognizant’s footprint across the telecommunications, media, technology and automotive sectors. Utegration will help Cognizant to further benefit from the digital transformation megatrend, and increase market share in the energy and utilities sectors. The deal will help in implementing its SAP fintech solutions for its new clients.

OneSource Vital’s offerings complement Cognizant’s existing finance and HR advisory implementation services with Workday. The transaction will expand Cognizant’s capabilities in consulting, deployment and post-deployment support across North America and the U.K. The transaction is expected to close by the end of the fourth quarter of 2022.

Acquisitions have been an integral part of Cognizant’s growth story in recent years. The company spent $715 million in 2021 on acquisitions. In the third quarter of 2022 (quarter ended Sep 30), acquisitions contributed 40 basis points (bps) to year-over-year revenue growth.

Moreover, Cognizant’s expanding partnership with Microsoft is a key catalyst. The companies recently showcased a new solution — the Cognizant Sustainability Accelerator, powered by the Microsoft Cloud and Microsoft Cloud for Sustainability — at COP27. The solution combines Cognizant's deep experience in IoT and data analytics with Microsoft's cloud capabilities.

Cognizant reported third-quarter 2022 revenues of $4.86 billion, which missed the Zacks Consensus Estimate by 2.94%. The reported figure was within management’s revenue guidance of $4.90-$4.94 billion.

Cognizant expects fourth-quarter 2022 revenues to be $4.8 billion (up from $4.72-$4.77 billion), indicating growth of 4.1% on a cc basis. Revenues for 2022 are expected to be $19.4 billion, indicating an improvement of 7.5% on a cc basis.

The company expects the adjusted operating margin to contract by 30 bps (compared with the previous guidance) to 15.3% for 2022. This is primarily due to the impairment of certain capitalized costs related to a large volume-based contract with a Health Sciences customer.

Adjusted earnings for 2022 are expected between $4.38 and $4.40 per share compared with the prior mentioned $4.43-$4.46.

Cognizant, which currently has a Zacks Rank #3 (Hold), is set to report fourth-quarter 2022 results on Feb 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Published in