Shares of the company, which also reported its first revenue miss in
six quarters, fell 8.1 percent to $53.80 in premarket trading on
New Jersey-based Cognizant said it expects adjusted profit of
between 78-80 cents per share and revenue of $3.18 billion-$3.24
billion for the three months ending March.
The top end of the revenue range indicates an 11.34 percent growth
in the current quarter from a year earlier, its slowest since the
March quarter of 2002.
Analysts on average were expecting a profit of 81 cents per share
and revenue of $3.32 billion for the first quarter, according to
Thomson Reuters I/B/E/S.
IT services companies have been focusing on high-margin digital
technology and automation outsourcing contracts at a time when
clients are cutting back on routine IT services spending.
Cognizant, which competes with Indian IT services firms such as Tata
Consultancy Services, and Infosys Ltd, had been benefiting in the
past few quarters from higher spending by clients in the healthcare
and financial sector in North America.
But, growth in healthcare seems to have slowed this quarter.
Revenue from the division rose about 23 percent to $951.9 million,
the slowest in five quarters, and accounted for about 30 percent of
The healthcare unit has led Cognizant's growth in the past year,
driven by its $2.7 billion acquisition of U.S. healthcare IT
services provider TriZetto Corp and the implementation of the U.S.
Affordable Care Act, or Obamacare.
However, an unprecedented wave of M&A activity among health insurers
has created some uncertainty for the company. On one hand, there are
fewer companies with which to do business. On the other, merged
companies may need help to integrate their systems.
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Revenue from the financial services business, its biggest, rose 16.6
percent to $1.31 billion.
Cognizant's revenue increased 17.9 percent to $3.23 billion.
The company's net income rose to $423.4 million, or 69 cents per
share, from $362.9 million, or 59 cents per share, a year earlier.
Excluding items, the company earned 80 cents per share.
Analysts on average had expected a profit of 78 cents per share and
revenue of $3.24 billion, according to Thomson Reuters I/B/E/S.
(Reporting by Abhirup Roy in Bengaluru; Editing by Sriraj Kalluvila)
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