Cognizant Technology Solutions Corp. (CTSH - Free Report) reported second-quarter 2017 non-GAAP earnings (adjusted for stock-based compensation and related tax-effect) of 87 cents per share, which beat the Zacks Consensus Estimate by a nickel.
The company reported non-GAAP earnings (excluding stock-based compensation) of 93 cents per share, up 6.9% from the year-ago quarter. The figure was better than management’s expectation of 89 cents. The growth can be attributed to robust top-line performance.
Revenues of $3.67 billion beat the Zacks Consensus Estimate of $3.66 billion and increased 8.9% year over year driven by growth across all the four domains. The figure was within management’s guided range of $3.63–$3.68 billion.
Cognizant narrowed its top-line guidance for 2017, which reflects improved visibility. Moreover, the company raised its earnings guidance. We believe that the results and the guidance indicate the company’s ability in harnessing the ongoing digital transition. Cognizant is significantly benefiting from accretive acquisitions.
Cognizant’s strong growth can be attributed to its significant exposure to the fast-growing verticals like Financial Services and Healthcare. The company has gained deep industry expertise and knowledge of the domains through partnerships with top firms like Microsoft (MSFT - Free Report) and SAP SE (SAP - Free Report) .
This strategy has enabled the company to deliver more value to clients and capitalize on new opportunities. It has also provided a competitive edge against the likes of Accenture (ACN - Free Report) , Infosys and Wipro Ltd.
Cognizant’s stock has gained 22.3% year to date, slightly underperforming the 24.2% rally of the industry it belongs to. We believe that the aforementioned factors will help the stock to rebound in the rest of 2017.
Segment-wise, Financial services (38.3% of revenues), that includes insurance, banking and transaction processing, grew 4.1% year over year to $1.41 billion.
Healthcare (28.6% of revenues) grew 9.5% year over year to $1.05 billion.
Products and Resources (20.4% of revenues) continued its growth momentum and surged 13.2% year over year to $747 million.
Communications, Media and Technology (12.7% of revenues) were $467 million, up 16.8% from the year-ago quarter.
Region-wise, revenues from North America increased 8.7% year over year and represented 77.7% of total revenue.
Revenues from the U.K. declined 7.4% year over year (7.8% of the total revenue). However, Rest of Europe continued to show strength with revenues soaring 22.8% from the year-ago quarter. As a result, Europe revenues increased 5.7% from the year-ago quarter to $579 million.
Rest of the World (6.5% of the total revenue) surged 21.2% to $240 million.
Selling, general & amortization (SG&A) expenses, as a percentage of revenues, contracted 10 basis points (bps) from the year-ago quarter to 19.3%.
Cognizant reported non-GAAP operating margin of 20%, which contracted 30 bps from the year-ago quarter.
For the third quarter of 2017, Cognizant expects revenues in a range of $3.73–$3.78 billion. Non-GAAP earnings are expected to be 94 cents per share. The Zacks Consensus Estimate for revenues and earnings is pegged at $3.68 billion and 86 cents, respectively.
Revenues are now expected to be in a range of $14.70–$14.84 billion up from prior guided range of $14.56–$14.84 billion. Non-GAAP earnings are anticipated to be at least $3.67 per share, up from prior expectation of $3.64.
The Zacks Consensus Estimate for revenues and earnings is pegged at $14.75 billion and $3.29 per share, respectively.
Currently, Cognizant has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: Tech Opportunity Worth $386 Billion in 2017
From driverless cars to artificial intelligence, we've seen an unsurpassed growth of high-tech products in recent months. Yesterday's science-fiction is becoming today's reality. Despite all the innovation, there is a single component no tech company can survive without. Demand for this critical device will reach $387 billion this year alone, and it's likely to grow even faster in the future.
Zacks has released a brand-new Special Report to help you take advantage of this exciting investment opportunity. Most importantly, it reveals 4 stocks with massive profit potential. See these stocks now>>
(We are reissuing this article to correct a mistake. The original article, issued earlier today, should no longer be relied upon.)