Cognizant profit tops Street; raises 2009 outlook

Tue, Nov 3 08:10 PM

Reuters - Cognizant Technology Solutions Corp posted third-quarter results that blew past market expectations, helped by strong growth across all industry sectors and geographies, and raised its outlook for the year.

The news, which sent its shares up 6 percent in trading before the bell, comes on the heels of an impressive display by its India-based rivals such as Tata Consultancy, Infosys Technologies and Wipro.

The results reveal a rebound at financial services -- the company's biggest segment that contributed 43 percent to its third-quarter revenue -- and healthcare, another key segment.

"Within financial services, many of our key clients are indicating that the worst is over for IT spending reductions and are more positive about the prospects for their 2010 budgets," Chief Financial Officer Gordon Coburn said on a conference call.

Financial services grew 7.4 percent in the quarter. Healthcare was up 30 percent, accounting for 27 percent of total revenue.

The company had a gross addition of 46 new customers in the third quarter, Coburn said.

Geographically, about 80 percent of its revenue comes from North America. A majority of Cognizant's employees and IT development centers are located in India.

Third-quarter net income rose to $136.6 million, or 45 cents a share, from $112.8 million, or 38 cents a share, a year earlier. Excluding items, earnings were 48 cents a share.

Revenue rose 16 percent to $853.5 million.

Analysts expected earnings of 41 cents a share, excluding exceptional items, on revenue of $805.6 million, according to Thomson Reuters I/B/E/S.

For 2009, the company forecast earnings of $1.88 a share, excluding items, on revenue of at least $3.26 billion. It had earlier forecast earnings of at least $1.80 a share on revenue of at least $3.14 billion.

For the fourth quarter, the company forecast earnings of 49 cents a share, excluding items, on revenue of at least $880 million.

Analysts were looking for fourth-quarter earnings of 42 cents a share, excluding exceptional items, on revenue of $830.5 million.

Shares of Cognizant, which also competes with larger players like Accenture, Hewlett-Packard and IBM, were up $2.40 at $41.20 in trading before the bell.

They closed at $38.80 Monday on Nasdaq. They have gained 28 percent in the last three months and 114 percent since the start of the year.

(Reporting by S. John Tilak in Bangalore; Editing by Maju Samuel, Vinu Pilakkott)

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