Cognizant (CTSH) to Report Second Quarter Results: What’s in Store?

Cognizant technology solutions CTSH is expected to release its second quarter 2022 results on July 27.

Second-quarter 2022 revenue is expected to be between $4.90 billion and $4.94 billion, representing growth of 9.3-10.3% at constant exchange rates.

Zacks’ consensus estimate for revenue is currently pegged at $4.92 billion, suggesting a 7.34% increase from the prior year quarter.

The consensus first-quarter earnings mark was flat at $1.09 per share for the past 30 days, suggesting 10.10% year-over-year growth.

Cognizant has beaten the Zacks consensus estimate for earnings in each of the past four quarters, with the average surprise being 3.43%.

Cognizant Technology Solutions Corporation Award and EPS Surprise

Cognizant Technology Solutions Corporation price-eps-surprise | Quote from Cognizant Technology Solutions Corporation

Factors to note

Cognizant’s performance in the second quarter of 2022 should have benefited from significant growth in its digital business activities, which exceeds the BPO market, reflecting the dynamics of AI, AR, automation, blockchain, IoT, quantum computing and solutions as a service.

The company has built a strong partner base to develop solutions that bring digitalization to industries, which have been slow to adopt digitalization, automation and cloud services. Cognizant has entered into a strategic partnership with the tech giant Microsoft MSFT to capitalize on the opportunity of the intersection between healthcare and cloud services.

Cognizant has collaborated with Microsoft to leverage its Cloud for Healthcare solution and created a new solution to facilitate remote patient monitoring to improve medical care. This should have helped Cognizant gain market share in the healthcare sector and increase revenue growth in the quarter ahead.

CTSH’s second quarter 2022 results are expected to reflect the positive effects of a strong book-to-bill ratio of 1.2 as the delivery team met demand with adequate supply despite unfavorable labor market conditions.

However, the company cut its constant currency revenue outlook by 250 basis points to reflect rising currency volatility due to geopolitical tensions and macroeconomic turmoil.

Compensation costs, which also include the cost of contractors, may have hurt Cognizant’s revenue in the reportable quarter. Industry supply chain constraints are expected to have had a negative impact on the company’s growth in the quarter ahead.

What our model says

According to the Zacks model, the combination of a positive earnings ESP and a Zacks rank of #1 (strong buy), 2 (buy), or 3 (hold) increases the odds of beating earnings. But it is not the case here.

Cognizant has an ESP on Earnings of -0.82% and a Zacks #3 ranking currently. You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.

Actions to Consider

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