Stock gain in US exchanges.
By R Chandrasekaran
CHENNAI: Technology and business process outsourcing service provider Cognizant Technology Solutions has not only delivered first quarter results in line with street expectations, but has also offered an upbeat outlook sending the stock higher in the U.S. stock exchange.
The company joined India’s biggest software exporter Tata Consultancy Services in offering an upbeat outlook, whereas Infosys and Wipro provided a downbeat forecast.
Cognizant Technology’s revenue grew 3.7 percent sequentially and 18.1 percent year-over-year to $2.02 billion and net profit increased 16.6 percent to $284.2 million or earnings of 93 cents a share from $243.7 million or 79 cents a share in the year-ago quarter.
While earnings per share are in line with the analysts’ predictions, revenue came in slightly above street expectations of $2.01 billion.
The March quarterly results were driven by 23 percent sales increase from European Union, which was higher than North American’s 16 percent growth. Cognizant could win bigger share of the Europe business due to lower margin business as the companies from EU were cutting down costs in the face of economic ambiguity.
For the second quarter, the company provided revenue outlook of $2.13 billion, slightly higher than $2.11 billion estimated by analysts. Similarly, for the year 2013, Cognizant expects at least 17 percent revenue growth or at least $8.60 billion.
The results and forecast come on the heels of growing concern over the immigration law and the U.S. budget cuts that could have the potential impact on IT spending. However, the National Association of Software Service Companies (NASSCOM) estimates a growth of 12 – 14 percent for the next fiscal year ending March 2014.
TCS disclosed that its revenue for the next fiscal will exceed the trade body projection, though TCS has not been providing annual outlook and its comments assumed significance in the challenging environment.
In contrast, Infosys provided 6 – 10 percent revenue growth for the next fiscal year. Wipro refrain from giving an annual outlook.
Of the top four IT companies from India, two are seeing revenue surpassing the trade body, whereas the other two are not as optimistic. It does appear that to win more orders, companies need to accept lower margin to stay with industry growth.
To contact the author, e-mail: rchandrasekaran@americanbazaaronline.com