Cognizant Technology Stock Slips After Hours On Mixed Q1 Results, Below Par Q2 Outlook

Cognizant Technology Solutions Corp CTSH reported first-quarter revenue growth of 9.7% year-over-year to $4.8 billion and +10.9% in constant currency, marginally missing the consensus of $4.83 billion.

Adjusted EPS improved to $1.08 from $0.97 in 1Q21, beating the consensus of $1.04.

Revenue by segments: Financial services $1.5 billion (+4.8% Y/Y), Healthcare $1.4 billion (+8.1% Y/Y), Products & Resources $1.1 billion (+13.2% Y/Y), and Communications, Media and Technology $0.8 billion (+18.1% Y/Y).

Digital revenue grew 20% Y/Y. Bookings grew 4% Y/Y, with trailing 12-month bookings of $23.4 billion, representing a 1.2x book-to-bill.

Cognizant’s operating cash flow for Q1 was $306 million vs. Q181 million a year ago, and free cash flow of $186 million.

The operating income totaled $724 million (+8.2% Y/Y) for the quarter, and the margin contracted 20 bps to 15%.

During the quarter, Cognizant repurchased 5 million shares for $444 million at an average price of $88.22 under its share repurchase program.

2Q22 Outlook: Cognizant expects revenue of $4.90 billion-$4.94 billion, or growth of 6.8%-7.8% (9.3%-10.3% in constant currency), vs. a consensus of $5 billion.

FY22 Outlook: The company expects revenues of $19.8 billion-$20.2 billion, or growth of 7.2%-9.2% (9.0%-11.0% in constant currency), vs. consensus of $20.22 billion. 

It expects Adjusted Operating Margin to expand 20 to 30 basis points to 15.6% - 15.7%. CTSH expects Adjusted EPS of $4.45-$4.55, below the consensus of $4.56.

Price Action: CTSH shares are trading lower by 4.58% at $80.50 during the post-market session on Wednesday.

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