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Cognizant (CTSH) to Report Q4 Earnings: What's in the Cards?

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Cognizant Technology Solutions Corp (CTSH - Free Report) is set to report fourth-quarter 2017 results on Feb 7. In the trailing four quarters, the company’s earnings have beat the Zacks Consensus Estimate on three occasions, delivering an average positive surprise of 1.91%.

Last quarter, Cognizant delivered a positive earnings surprise of 3.16%. Revenues of $3.77 billion were in line with the Zacks Consensus Estimate and increased 9.4% year over year driven by growth in all the four domains.

For fourth-quarter 2017, Cognizant expects revenues in the range of $3.79-$3.85 billion. Non-GAAP earnings are expected to be 95 cents per share.

Let’s see how things are shaping up for this announcement.
 

 

Domain Expertise: Key Catalyst

Cognizant is consistently developing its capabilities to gain from the ongoing digital transition, especially from the integration of the new digital framework with legacy technology platforms.

In December 2017, the company was recognized as a global leader in Digital Workplace Services by Information Services Group (ISG), a leading independent global technology research and advisory firm.

Cognizant’s strong growth can be attributed to its significant exposure to fast-growing verticals like Financial Services and Healthcare. Robust growth in the company’s Products & Resources segment along with its Communications, Media and Technology segments is also driving the top line.

Notably, Financial Services segment is driven by growth in insurance companies and mid-tier banks, which offset the softness from large banks. Higher demand from payer and top-tier consulting clients in the healthcare segment is likely to help the company sustain the momentum.

Acquisitions & Partnerships: Other Drivers

Moreover, acquisitions have been a key growth driver for Cognizant. Buyouts like TMG Health have not only led to an increase in customers but have also widened its domain and overall digital delivery capabilities.

In the fourth quarter, Cognizant acquired Zone — one of the leading independent full-service digital agencies in the U.K. The company also bought Netcentric, a leading provider of digital experience and marketing solutions. The Zurich-based company enhances Cognizant’s ability to deliver business critical digital experience solutions for clients in Europe and around the world.

Additionally, the company 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) .

During the quarter, the company cloud-enabled the SAP infrastructure at Dubai-based ANHAM FZCO, a leading Middle East-based supply chain firm. Cognizant migrated the on-premise enterprise SAP production system workloads to the Microsoft Azure cloud platform.

The partnerships with leading IT firms have enabled the company to deliver more value to clients and capitalize on new opportunities. It has also provided a competitive edge over the likes of Accenture, Infosys and Wipro.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Cognizant has a Zacks Rank #3 but its Earnings ESP is 0.00%. Therefore, our proven model does not conclusively show an earnings beat for the company this quarter.

Stock That Warrants a Look

Here is a stock that you may want to consider as our model shows that it has the right combination of elements to deliver an earnings beat in its upcoming release.

NVIDIA (NVDA - Free Report) has an Earnings ESP of +6.87% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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