Yahoo Finance Cognizant (CTSH) Q4 Earnings Meet Estimates, Revenues Rise Y/Y
Cognizant Technology Solutions CTSH reported fourth-quarter 2022 non-GAAP earnings of $1.01 per share, in line with the Zacks Consensus Estimate but declining 8.2% year over year.
Revenues of $4.84 million beat the consensus mark by 1.18%. The top line increased 1.3% year over year and 4.1% at constant currency (cc).
Digital revenues accounted for 51% of revenues and increased 4% year over year or 7% at cc. Acquisitions contributed 40 basis points (bps) to top-line growth, offset by 60 bps of negative impact from the sale of Samlink.
Top-Line Details
Financial services revenues (30.6% of revenues) decreased 1.4% year over year at cc to $1.48 billion. The divestiture of Samlink negatively impacted revenues by 180 bps.
Banking and financial services were weak, a trend Cognizant expects to continue for the next several quarters.
Cognizant Technology Solutions Corporation Price, Consensus and EPS Surprise
Cognizant Technology Solutions Corporation price-consensus-eps-surprise-chart | Cognizant Technology Solutions Corporation Quote
Healthcare revenues (29.5% of revenues) increased 5.4% year over year at cc to $1.43 billion. Cognizant witnessed some weakness due to the challenging macro environment and regulatory complexity.
Products and Resources revenues (23.7% of revenues) increased 6.8% year over year at cc to $1.15 billion. Continued strength among automotive, logistics and utility customers benefited the segment’s top-line growth.
Communications, Media and Technology revenues (16.2% of revenues) were $784 million, up 9.3% from the year-ago quarter at cc.
Region-wise, revenues from North America increased 2.9% year over year at cc and accounted for 74.2% of the total revenues.
Revenues from Europe increased 7.7% from the year-ago quarter at cc and made up 18.7% of the total revenues. Revenues from the U.K. and Continental Europe increased 15.6% and 0.7% year over year, at cc, respectively.
Rest of the World revenues increased 7.2% at cc and represented 7.1% of the total revenues.
Operating Details
Selling, general and administrative expenses, as a percentage of revenues, decreased 50 bps year over year to 17.8%.
Total headcount at the end of the fourth quarter was 355,300, up 5,900 sequentially and 24,700 year over year.
Voluntary attrition, on a quarterly annualized basis, declined to 19% from 29% in the third quarter of 2022 and 31% in the fourth quarter of 2021.
Cognizant reported a non-GAAP operating margin of 14.2%, which contracted 110 bps year over year.
Balance Sheet
Cognizant had cash and short-term investments of $2.2 billion as of Dec 31, 2022, compared with $2.7 billion as of Sep 30, 2022.
As of Dec 31, 2022, Cognizant had a total debt of $646 million, up from $636 million as of Sep 30, 2022.
It generated $702 million in cash from operations compared with $1.03 billion in the previous quarter.
Free cash flow was $612 million compared with $953 million reported in the prior quarter.
In fourth-quarter 2022, Cognizant returned $300 million through share repurchases. As of Dec 31, 2022, it had $2.8 billion remaining under the current share repurchase program.
Guidance
First-quarter 2023 revenues are expected between $4.71 billion and $4.76 billion, indicating a decline of 1% to flat on a cc basis.
Zacks Rank & Stocks to Consider
Currently, Cognizant has a Zacks Rank #3 (Hold).
Cambium Networks CMBM, Bruker BRKR and RingCentral RNG are some better-ranked stocks that investors can consider in the broader sector. While Cambium sports a Zacks Rank #1 (Strong Buy), both Bruker and RingCentral carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cambium shares have declined 9.9% in the past year. CMBM is set to report its fourth-quarter 2022 results on Feb 16.
Bruker shares have gained 8.2% in the past year. BRKR is set to report its fourth-quarter 2022 results on Feb 9.
RingCentral shares have declined 70.4% in the past year. RNG is set to report its fourth-quarter 2022 results on Feb 15.
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