Earnings Preview: Cognizant Technology Solutions

| About: Cognizant Technology (CTSH)

Cognizant Technology Solutions (NASDAQ:CTSH) is expected to report Q2 earnings after marekt close Thursday July 31, with a conference call scheduled for 4:00 pm ET.


The consensus estimate is 35c for EPS and $682.48M for revenue, according to First Call.

Analyst Views

The company, on its last earnings call, provided weak guidance for Q2 EPS of 38c to 39c and revenue at least $680M. Wachovia says Q2 revenue should be at least in-line given what they feel was conservative guidance. The firm feels that Q2 EPS expectations have a lot of cushion given the sharp drop in the Indian Rupee which is a plus for operating margin. Wachovia says CY08 revenue guidance will likely be the primary focus item for investors: Current guidance is for revenue of ''approximately'' $2.95B, which implies up about 38%. Although CFO comments at Wachovia's Nantucket conference suggest comfort at 35% with ''work to do'' to get to 38%. Wachovia's estimate is $2.91B, up 36%; Street $2.88B, up 34.7%. Wachovia believes investors are discounting a CY08 revenue guidance of as low as 32% given the cautious commentary from Tier offshore peers Infosys (NASDAQ:INFY), Wipro (NYSE:WIT), Tata Consultancy and Satyam (SAY) during mid-July reports, and continued economic/credit concerns. Wachovia thinks CY08 EPS guidance less of a concern given benefit of Forex, upside in utilization and a tight grip on discretionary spending: Guidance is for ''approximately'' $1.50; Wachovia's estimate $1.50; Street $1.48.

In Cowen's view, the combination of possible downward earnings revisions, a cautious near-term outlook and negative investor sentiment could pressure Cognizant's stock ahead and following the company's June quarterly earnings release. Having said that, Cowen says solid fundamentals, reasonable projections/guidance and an attractive valuation could make the stock more compelling following the company's earnings release.

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Tagged: , Business Software & Services, Earnings
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