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

Zacks Equity Research

Cognizant Technology Solutions CTSH is set to report fourth-quarter 2019 results on Feb 5.

For the quarter, the company expects revenues to grow between 2.1% and 3.1% at constant currency basis.

The Zacks Consensus Estimate for revenues is currently pegged at $4.22 billion, indicating growth of 2.3% from the figure reported in the year-ago quarter.

The consensus mark for fourth-quarter earnings has been steady at $1.04 over the past 30 days. The estimate indicates a year-over-year decline of 8%.

Notably, the company beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one. It has negative earnings surprise of 0.02% on average.

Let’s see how things have shaped up for this announcement.

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

Factors to Consider

Cognizant’s fourth-quarter results are likely to benefit from its capabilities in areas like automation, digital engineering, cloud and IoT.

Notably, solid demand for digital engineering, cloud infrastructure, IoT and analytics solutions are expected to have driven the company’s product and resource (22.7% of revenues) revenues in the to-be-reported quarter.

Moreover, the communications, media and technology (14.5% of revenues) segment is likely to have benefited from strong demand for digital engineering services. However, declining demand for content services might get reflected in the segment’s top-line result.

Cognizant expects its Healthcare (27.7% of revenues) business to be hurt by consolidation in the healthcare industry. However, strong demand for digital operations and cloud-based environments is expected to have benefited Life Sciences in the to-be-reported quarter.

Moreover, the company expects three of its top five banking clients to remain under pressure despite the other two clients’ continued growth. It also expects its insurance clients to be affected by executive transitions, which will slow down the decision-making process around deals that are in the pipeline. This is expected to have hurt the company’s financial services (35.1% of revenues) business in the fourth quarter.

Increased spending on hiring salespersons as well as training and reskilling expenses is also expected to have hurt the company’s bottom line in the quarter.

Further, expenses pertaining to the company’s acquisition of Contino are expected to be reflected in the fourth-quarter results.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Cognizant has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Advanced Energy Industries AEIS has an Earnings ESP of +10.8% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CEVA, Inc CEVA has an Earnings ESP of +27.06% and a Zacks Rank #1.

Perion Network Ltd PERI has an Earnings ESP of +22.58% and a Zacks Rank #1.

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