Cognizant Technology Solutions Corp (NASDAQ: CTSH) reported Thursday after the close with below-consensus first-quarter revenue and reduced its full-year guidance, citing weakness in the financial and health care verticals.
Cognizant's disappointing first-quarter results boiled down to weakness in financial services and health care clients and margin pressure, Ramnani said in a Thursday note. (See his track record here.)
The magnitude of downward revision to full-year revenue guidance is material, with the outlook assuming 2.7-percent organic growth in constant currency compared to the 6.5-percent growth estimated earlier, the analyst said.
Downward revisions to Cognizant's long-term targets are likely, Ramnani said.
The analyst attributed the downgrade to three factors:
- Weakness in financial services, which accounts for 35 percent of total revenue, and health care, which accounts for 28 percent of revenues, persisting in the near-to-medium term.
- Lack of clarity and a time frame for revised long-term targets.
- Potential incremental senior-level changes expected over the next two to three quarters, weighing on the stock.
On a positive note, KeyBanc said the lowered targets could be conservative and set the company up for a "beat-and-raise" cadence. The research firm also sees the possibility of recovery in some large accounts.
The Price Action
In pre-market trading Friday, Cognizant shares were sliding 7.73 percent to $61.46.
Is India's 7.3% Growth Worth An Investment?
Infosys Earnings Preview
Latest Ratings for CTSH
View More Analyst Ratings for CTSH
View the Latest Analyst Ratings
See more from Benzinga
- The Daily Biotech Pulse: Obseva Reports Positive Endometriosis Drug Trial, Assembly Biosciences Execs Depart, Coherus Settles With Amgen
- Scotts Miracle-Gro Analyst Sees Tougher Setup For Second Half Of 2019
- Vistagen Shares Fall Under After Depression Drug Flunks Midstage Trial
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.