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Cognizant (CTSH) to Report Q3 Earnings: What's in Store?

Zacks Equity Research

Cognizant Technology Solutions CTSH is set to report third-quarter 2019 results on Oct 30.

For the quarter, the company expects revenues to grow between 3.8% and 4.8% at cc to $4.23-$4.27 billion. The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $4.21 billion, indicating growth of 3.2% from the figure reported in the year-ago quarter.

Moreover, the consensus mark for earnings has been steady at $1.05 over the past 30 days that implies a year-over-year decline of 11.8%.

Notably, the company’s earnings have beaten the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 0.6%.

In the last reported quarter, Cognizant’s non-GAAP earnings of 94 cents per share beat the Zacks Consensus Estimate by a penny. Revenues of $4.14 billion also surpassed the consensus mark of $4.13 billion.

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

Factors to Consider

Lackluster spending by large banks in the financial services sector, weakness in technology vertical and stiff competition in the IT services market are expected to get reflected in the top-line number.

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


Notably, the financial services domain accounts for a significant part (35.6% of second-quarter 2019 revenues) of the company’s top line.

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

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

Nevertheless, Cognizant is expected to have benefited from increasing adoption of 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. The third-quarter top line is expected to have benefited from these initiatives.

Moreover, acquisitions have played an important role in charting out Cognizant’s growth trajectory, which is expected to have continued in the third quarter.

What Our Model Says

According to the Zacks model, a company with a positive Earnings ESP  along with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates.

Cognizant has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. 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.

Advanced Energy Industries AEIS has an Earnings ESP of +4.17% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Micro Devices AMD has an Earnings ESP of +6.54% and a Zacks Rank #2.

Apple AAPL has an Earnings ESP of +0.04% and a Zacks Rank #3.

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