Cognizant (CTSH) Q4 Earnings: Is a Surprise in the Cards?
Cognizant Technology Solutions Corp. (CTSH) is set to report fourth-quarter 2016 results on Feb 8. Last quarter, it posted a positive earnings surprise of 8.00%. In the trailing four quarters, the company has recorded an average positive earnings surprise of 7.26%.
In the past one year, Cognizant’s shares have generated a negative return of 13.35% compared with the Zacks Business Software Services/BPO industry’s loss of 8.06%.
Let’s see how things are shaping up for this announcement.
Factors at Play
In the last reported quarter, the company beat estimates on both counts. Plus, on a year-over-year basis, Cognizant recorded sales growth of 8.4%.
Cognizant is consistently developing its capabilities to benefit from the ongoing digital transition especially when it comes to integration of the new digital framework with legacy technology platforms. Moreover, accretive acquisitions such as the TriZetto and more recently, the buyouts of Mirabeau BV and the technology and business process services unit of Frontica Business Solutions AS are likely to benefit the company.
However, the company has been seeing some sluggishness of late in the healthcare and financial sector, which are its biggest markets. Moreover, stiff competition from peers like Accenture ACN, Infosys and Wipro Ltd. WIP remains a concern.
For the fourth quarter of 2016, the company expects revenues in a range of $3.45 billion to $3.51 billion. Non-GAAP earnings per share are expected to be in a band of 85 cents to 88 cents.
Cognizant Technology Solutions Corporation Price and EPS Surprise
Cognizant Technology Solutions Corporation Price and EPS Surprise | Cognizant Technology Solutions Corporation Quote
Earnings Whispers
Our proven model does not conclusively show that Cognizant is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.
Zacks ESP: Earnings ESP for Cognizant is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 77 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Cognizant’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Ranks #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here is a stock that, as per our model, has the right combination of elements to post an earnings beat this quarter:
Twilio Inc. TWLO with an Earnings ESP of +8.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
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