Cognizant's forecast weak as Brexit weighs on clients

By Rishika Sadam

REUTERS - IT services provider Cognizant Technology Solutions Corp forecast current-quarter revenue below analysts' estimates, citing the impact of Brexit vote on its clients from the financial services industry.

The company, which gets more than a third of its revenue from the financial services sector, said clients were being cautious about their IT spending as they gauge the impact of Britain's vote in June to leave the European Union.

"Certainly we see a more a cautious approach in our financial services segment since the UK vote ... more importantly due to the impact it has on the outlook for near term interest rates," President Gordon Coburn told Reuters.

This week, Wall Street bank Goldman Sachs Group Inc said Brexit might hurt some of its operations in the EU and could require restructuring of some of its businesses.

JPMorgan Chase & Co Chief Executive Jamie Dimon has also said the event could lead to duplicate costs to provide banking services to European customers.

Shares of Cognizant, which gets about 16 percent of its total revenue from Europe, recouped early losses and were up 1.6 percent on the Nasdaq.

Coburn said healthcare clients were holding back on spending due to delayed M&A regulatory process in the United States.

Big healthcare deals, including Anthem Inc's acquisition of Cigna Corp and Aetna Inc's deal to buy Humana Inc, have been delayed as U.S. regulators have sued to block them on antitrust concerns.

Cognizant is betting big on digital services such as cloud and analytics and recently acquired Idea Couture, a digital design firm.

The company forecast third-quarter revenue of $3.43 billion to $3.47 billion, below the average analyst estimate of $3.54 billion.

Revenue from its business that caters to the financial services industry rose 8.1 percent to $1.35 billion, while healthcare services revenue rose 6.9 percent to $958.8 million in the quarter.

However, the company's net income fell to $252.4 million, or 41 cents per share, in the quarter ended June 30 from $420.1 million, or 68 cents per share, a year earlier.

Excluding items, the company earned 87 cents per share, while total revenue rose 9.2 percent to $3.37 billion.

Analysts on average were expecting earnings of 82 cents per share on revenue of $3.37 billion for the quarter, according to Thomson Reuters I/B/E/S.

(Reporting by Rishika Sadam in Bengaluru; Editing by Anil D'Silva)