Cognizant Technology Solutions profit beats estimates, outlook disappoints

May 08 2013, 16:24 IST
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SummaryClients in Europe ramped up outsourcing, but guided first-quarter profit below estimates.

IT services company Cognizant Technology Solutions Corp reported a modestly better-than-expected quarterly profit as clients in Europe ramped up outsourcing, but guided first-quarter profit below analysts' estimates.

European companies have been outsourcing more in recent months as instability in the region forces them to restructure and cut costs. However, some U.S. companies have said they may be seeing a bottom after years of weakness in the region.

The economic downturn in Europe has served as a catalyst for longer-term growth for outsourcing in the region, Cognizant President Gordon Coburn said after the company reported third-quarter results in November.

Rivals Tata Consultancy Services Ltd and Infosys Ltd, India's top two software services providers, reported better-than-expected results earlier this month boosted by client additions and accelerated IT spending by existing customers.

While 13 new deals in Europe boosted Infosys' revenue in the quarter ended Dec. 31, TCS termed Continental Europe a "soft point" as revenue from the region dropped sequentially.

Cognizant forecast first-quarter earnings of 92 cents per share on revenue of at least $2 billion.

Analysts were expecting earnings of 93 cents per share on revenue of $2 billion, according to Thomson Reuters I/B/E/S.

The company, founded in 1994 as a captive unit of Dun & Brad Street in India, has not missed analysts' profit estimates for 16 quarters.

Cognizant's net income rose 16 percent to $278.8 million, or 92 cents per share, in the fourth quarter, from $240.1 million, or 78 cents per share, a year earlier.

Total revenue rose 17 percent to $1.95 billion. Revenue from Europe, which accounts for nearly a fifth of the company's total revenue, rose 19 percent to $326.2 million.

Analysts on average had expected earnings of 91 cents per share on revenue of $1.95 billion.

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