Cognizant Gets mixed Reviews From Analysts On Q2Performance, But All Trim Price Targets

Analysts reserved mixed opinions on Cognizant Technology Solutions Corp CTSH post Q2 results and management guidance.

RBC Capital analyst Daniel Perlin maintained Cognizant with an Outperform and cut the price target from $97 to $88. Despite the volatile macro environment, CTSH's Q2 revenue matched his forecast while EPS beat his estimate.

With an increased FX headwind forecast, management lowered its FY22 revenue and provided Q3 revenue guidance below his and Street estimates but increased its FY22 EPS guide. 

Barclays analyst Ramsey El-Assal reiterated an Underweight and PT of $55. CTSH reported in-line revenue results and a bottom-line beat in Q2, while supply constraints and inflationary pressure continued to impact the business. 

Management raised FY EPS guidance but cut revenue outlook. Ramsey expected shares to be down modestly in tomorrow's tape on the back of these results. 

BMO Capital analyst Keith Bachman reiterated an Outperform and PT of $86. Contrary to his preview, CTSH could hold its margin guide for FY22 but lowered its CC revenue growth guide by 100 bps. 

He thought that supply challenges, or leaving deals on the table, were the predominant factor in the miss/guide more than demand weakness and contributed to better margins. 

Bachman said CTSH operated, unlike its peers, focusing on margin improvement instead of optimizing for growth. He believed Cognizant's valuation remains intriguing given prospects of high-single-digit revenue growth in FY23 and steady FCF generation. 

Needham analyst Mayank Tandon reiterated Hold on CTSH. CTSH's 2Q results were solid as revenue was in line with expectations and EPS beat expectations, boosted by margin expansion and share buyback activity. 

While management could hold its operating margin outlook steady as the company effectively navigates cost pressures, he found the 3Q22 revenue outlook disappointing. They cut the FY22 revenue outlook to reflect softer bookings and FX challenges. 

While Tandon expected CTSH to continue to work towards pivoting its business towards higher growth digital services, he remained on the sidelines with the shares trading at an ex-cash multiple of ~13.5x his FY23 estimate.

Price Action: CTSH shares traded lower by 4.41% at $67.20 on the last check Thursday.