Cognizant betters peers in Q1 growth

Tags: Companies
IT services major Cognizant Technology on Wednesday reported $2.42 billion revenue for the March quarter, just shy of its guidance for $2.50 billion to $2.53 billion and average analyst estimate of $2.54 billion.

Higher IT spend by customers in Europe helped the firm grow revenue 19.9 per cent on year and 2.8 per cent sequentially, helping it post better-than-expected profit for the quarter. However, revenue gro-wth slowed in North America, the company’s biggest market.

Cognizant’s growth was still better than TCS (1.3 per cent), Infosys (1.3 per cent de-growth) and HCL Tech (2 per cent). Wipro reported 3.42 per cent sequential revenue growth for the quarter.

Net income for the quarter on a GAAP (generally accepted accounting principles) basis stood at $348.9 million, or $0.57 per diluted share. Non-GAAP diluted earnings per share was $0.62 compared with $0.51 in the year-ago quarter. While GAAP operating margin for the quarter was 19 per cent, the non-GAAP margin was 20.8 per cent, higher than the company’s target range of 19 per cent to 20 per cent. Cognizant has been exceeding its guidance for several quarters now. For the June quarter, the firm expects revenue to be about $2.50 billion.

“The firm is providing a range this time to better align expectations,” CFO Karen McLoughlin said.

The Teaneck, New Jersey-based company finished the quarter with $3.86 billion in cash and short-term investments. Quarterly revenue from Europe rose 35 per cent, the strongest growth since the company started breaking out revenue by region two years ago.

Europe contributed $470.1 million, or 19.4 per cent, to the total revenue in the quarter ended March 31. Revenue growth in North America slowed slightly to 16.1 per cent, to $1.84 billion, after rising 16.3 per cent in the first quarter of 2013.

Cognizant has projected revenue for FY14 at $10.3 billion, up by at least 16.5 per cent from 2013. Non-GAAP diluted EPS for the year is expected to be at least $2.54, slightly higher than its previous guidance of $2.51 (factoring the two-to-one stock split announced last quarter).

Francisco D’Souza, CEO of Cognizant said: “Cognizant continues to be well-positioned to help clients, as they face secular shifts impacting their businesses. Our broad set of capabilities and compelling value proposition enable Cognizant to help clients simultaneously ‘run better’ and ‘run different’, by not only driving efficiency in their current operations, but also helping them reimagine and redesign their business models.” At the end of Q1, the company had about 1.78 lakh employees globally. Annualised attrition, including those at BPO and trainees, was at 14 per cent.

Gordon Coburn, president of Cognizant, said, “Net headcount addition for the first quarter was approximately 7,200, which was the strongest hiring we have experienced in any quarter in the past two-and-a-half years. The strong hiring is a testament to our continued confidence in the demand environment and our ability to post industry-leading revenue growth.”

(With inputs from Reuters)

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