Cognizant trims Q1 outlook amid solid Q4

Cognizant is performing well, but sees sales lower than expectations in the current quarter.
Written by Larry Dignan, Contributor

Cognizant Technologies said its first quarter will be light relative to expectations amid growing signs that IT spending is slowing.

Like other technology companies, Cognizant's outlook indicates that customers are tapping the brakes a bit. The company projected first quarter non-GAAP earnings between 78 cents a share to 80 cents a share on revenue of $3.18 billion to $3.24 billion.

Wall Street was expecting earnings of 81 cents a share on revenue of $3.32 billion.

For the year, Cognizant projected non-GAAP earnings between $3.32 a share to $3.44 a share on revenue of $13.65 billion to $14.20 billion. Wall Street was looking for earnings of $3.47 a share on revenue of $14.12 billion.

Gordon Coburn, president of Cognizant, said on a conference call:

We are seeing a soft start to the year in banking and financial services, primarily due to macroeconomic concerns and in healthcare on the back of industry consolidation in the payer industry. Clients continue to face a dual mandate within their operations and we expect many of the trends we saw driving demand within our portfolio services in 2015 to continue over the course of 2016.

The outlook comes as Cognizant, an Indian outsourcing company that has pivoted to focus on digital transformation projects, reported a solid fourth quarter even though sales were light relative to expectations.

Cognizant reported fourth quarter earnings of $423.4 million, or 69 cents a share, on revenue of $3.13 billion, up 17.9 percent from a year ago. Non-GAAP earnings were 80 cents a share, 2 cents better than estimates.

For 2015, Cognizant reported earnings of $1.62 billion, or $2.65 a share, on revenue of $12.42 billion, up 21 percent from the previous year.

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