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Tickers in this Article: CTSH
Cognizant Technology Solutions (Nasdaq:CTSH) announced its results for the third quarter on November 7, 2012. Cognizant Technology Solutions provides custom IT consulting and technology services as well as outsourcing services for companies in North America, Europe, and Asia.

Earnings are perhaps the single most studied number in a company's financial statements because they show a company's profitability. SEE: Can Earnings Guidance Accurately Predict The Future?

The Numbers: Cognizant Technology beat expectations with its latest EPS and revenue figures. The company reported 91 cents per share versus the 87 cents per share estimate and revenues of $1.89 billion versus the $1.71 billion estimate. EPS rose 24.7% while revenue climbed 18.2% from the same period last year. Cognizant Technology has averaged revenue growth of 24.5% over the past five quarters. For the third quarter, the company reported net income of $276.9 million. According to the reported number, this is up 21.9% from last year's figures. Last quarter marked the third in a row of rising net income.

Management Quote: "Cognizant's strong results reaffirm the acceptance of our value proposition that helps clients address the dual mandate of driving efficiency and effectiveness in their core business while investing in innovation and business transformation for long-term growth," said Francisco D'Souza, Chief Executive Officer. "Our consulting-led approach, intimate client relationships, deep domain knowledge and robust execution give us the confidence to deliver revenue growth of at least 20% in 2012."

A Look Back: Gross margin shrank one percentage points to 41.2%. The contraction appeared to be driven by increased costs, which rose 20.2% from the year earlier quarter while revenue rose 18.2%.

Net income has increased 17.6% year-over-year on average across the last five quarters. The biggest gain came in the most recent quarter, when income climbed 21.9% from the year-earlier quarter.

Looking Ahead: When earnings estimates stay consistent leading up to earnings season, this usually shows analysts accurately predicted earnings estimates and business is stable. Be cautious though as this may also be a warnings sign that earnings could come at a huge surprise to the upside or downside as analyst did not correctly predict earnings. Steady earnings estimates mean there is not enough change going on with the company to make analysts change their opinions. When earning estimates are steady, investors can look at the revenue trend for a more fundamental indicator. The average estimate for the fiscal year has remained at $3.38 per share.

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