Yahoo Finance Cognizant (CTSH) Boosts ER&D Capabilities With Belcan Buyout
Cognizant Technology Solutions CTSH is expanding its footprint in the Aerospace and Defense Market by signing a definitive agreement to acquire Belcan, a leading global supplier of digital engineering services.
The acquisition, valued at approximately $1.3 billion in cash and stock, will enhance Cognizant’s capabilities in mission-critical Engineering Research & Development (ER&D) services across key sectors, including aerospace, defense, space, marine, and industrial.
With Belcan’s deep domain expertise, blue-chip client base and robust workforce of more than 6,500 engineers and technical consultants, Cognizant aims to tap into the $190-billion ER&D services market, which is likely to register a compound annual growth rate (CAGR) of over 10% through 2026.
The acquisition is anticipated to generate more than $800 million in annualized revenues for Cognizant in 2024. It promises substantial growth opportunities, including expected earnings accretion by 2026 and more than $100 million in annual revenue synergies within three years.
Cognizant Technology Solutions Corporation Price and Consensus
Cognizant Technology Solutions Corporation price-consensus-chart | Cognizant Technology Solutions Corporation Quote
Expanding Clientele Boosts Prospect
Acquisitions have strengthened Cognizant’s digital capabilities and clientele. In first-quarter 2024, acquisitions contributed 70 basis points (bps) to top-line growth.
Cognizant’s acquisition of Thirdera in January, an Elite ServiceNow NOW Partner, has been a major growth driver.
The buyout is boosting Cognizant’s ServiceNow capabilities, expanding its global presence and training expertise, thereby advancing its partnership to build a $1 billion AI-driven automation business.
Moreover, CTSH’s robust partner base, which includes the likes of Microsoft MSFT and Fair Isaac FICO, has been a critical catalyst.
In first-quarter 2024, Cognizant expanded its partnership with Microsoft, integrating Microsoft Copilot and Cognizant’s advisory and digital transformation services to drive generative AI adoption and facilitate business transformation for employees and enterprise clients.
Cognizant also partnered with FICO to deliver a cloud-based real-time payment fraud prevention solution, leveraging AI and ML to safeguard customers in North America’s digital payment landscape.
Q2 View Not So Rosy
Despite strategic acquisitions and a strong partner base, the challenging macroeconomic environment, along with weakness in the Financial Services segment, is a concern for CTSH’s prospects.
In first-quarter 2024, Financial Services revenues declined 6.2% year over year to $1.38 billion.
Cognizant’s shares have declined 10.9% against the Zacks Computer & Technology sector’s rise of 19% year to date.
This Zacks Rank #3 (Hold) company expects second-quarter 2024 revenues to be between $4.75 billion and $4.82 billion, indicating a decline of 2.9% to 1.4% (a decline of 2.5-1% on a cc basis). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for the second quarter is pegged at $4.80 billion, indicating a year-over-year decline of 1.8%.
The consensus mark for earnings is pegged at $1.12 per share, unchanged in the past 30 days.
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