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

Zacks Equity Research

Cognizant Technology Solutions CTSH is set to report second-quarter 2019 results on Jul 31.

Notably, the company’s earnings have beaten the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 2.37%.

In the last reported quarter, Cognizant’s non-GAAP earnings of 91 cents per share missed the Zacks Consensus Estimate of $1.03. Revenues of $4.11 billion also lagged the consensus mark of $4.17 billion.

For second-quarter 2019, Cognizant expects revenues to grow between 3.9% and 4.9% at cc. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $4.13 billion, indicating growth of 3% from the figure reported in the year-ago quarter.

Moreover, the consensus mark for earnings has been steady at 93 cents over the past 30 days that implies a year-over-year decline of 21.9%.

Cognizant Technology Solutions Corporation Price and EPS Surprise


Cognizant Technology Solutions Corporation Price and EPS Surprise
Cognizant Technology Solutions Corporation Price and EPS Surprise

Cognizant Technology Solutions Corporation price-eps-surprise | Cognizant Technology Solutions Corporation Quote

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

Factors to Consider

Lackluster spending by large banks in the financial services sector and stiff competition in the IT services market are concerns. Notably, the financial services domain accounted for a significant part (34.9% of first-quarter 2019 revenues) of the company’s top line.

Moreover, healthcare growth has also been affected by the ongoing industry-wide consolidation.

These factors are expected to hurt top-line performance in the to-be-reported quarter.

Nevertheless, Cognizant is gaining from increasing interest in its digital, analytics, cloud and virtualization solutions. The company has been enhancing its capabilities to gain from the ongoing digital transition, especially the integration of the new digital framework with legacy technology platforms.

Moreover, acquisitions have played an important role in charting out Cognizant’s growth trajectory. The buyouts have not only strengthened the company’s digital capabilities but also boosted its clientele. Additionally, acquisitions have helped Cognizant expand in countries like Belgium, the Netherlands, Romania and Australia.

Notably, during the second quarter of 2019, Cognizant agreed to buy Ireland-based Zenith Technologies. Zenith uses digital technologies to manage, control and optimize drug and medical device production for maximum operational efficiency and regulatory compliance. The buyout will help expand the company’s footprint among healthcare organizations.

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. Meanwhile, Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Cognizant has a Zacks Rank #4 and an Earnings ESP of -1.68%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are a few stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Zendesk ZEN has an Earnings ESP of +7.84% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CGI Group GIB has an Earnings ESP of +1.27% and a Zacks Rank #2.

Asure Software ASUR has an Earnings ESP of +8.11% and a Zacks Rank #2.

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