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Cognizant (CTSH) to Report Q3 Earnings: What's in Store?

Zacks Equity Research
·3 min read

Cognizant Technology Solutions CTSH is scheduled to report third-quarter 2022 results on Nov 2.

The company’s third-quarter 2022 revenues are expected between $4.98 billion and $5.03 billion, indicating growth of 7.5-8.5% on a constant-currency (cc) basis from the year-ago reported figure.

The Zacks Consensus Estimate for revenues is pegged at $5.01 billion, suggesting an increase of 5.55% from the year-ago quarter’s reported number.

The consensus mark for third-quarter earnings has been unchanged at $1.17 per share over the past 30 days, suggesting year-over-year growth of 10.38%.

Cognizant beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 3.79%.

Cognizant Technology Solutions Corporation Price and EPS Surprise

 

Cognizant Technology Solutions Corporation Price and EPS Surprise
Cognizant Technology Solutions Corporation Price and EPS Surprise

Cognizant Technology Solutions Corporation price-eps-surprise | Cognizant Technology Solutions Corporation Quote

Factors to Note

Cognizant’s third-quarter 2022 performance is expected to have benefited from significant growth in its digital business operations, which is outgrowing the BPO market, reflecting momentum in AI, AR, automation, blockchain, IoT, quantum computing and as-a-service solutions.

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In the third quarter, Cognizant is expected to have benefitted from its strategic partnership with tech giant Microsoft MSFT to capitalize on the opportunity of intersection between health and cloud services.

Cognizant has collaborated with Microsoft to leverage the latter’s Cloud for Healthcare solution and built a solution to aid in remote patient monitoring for improved medical care. This is expected to have helped Cognizant earn market share in the healthcare industry and increase revenue growth in the to-be-reported quarter. Microsoft has also been helping Cognizant address the cloud transformation megatrend in the insurance sector.

CTSH’s third-quarter 2022 results are expected to reflect the positive effects of a healthy book-to-bill ratio of 1.2, as the delivery team met the demand with adequate supply despite unfavorable labor market conditions.

However, the company has reduced its cc outlook for revenues by 250 basis points to reflect the rising volatility in foreign exchange due to geopolitical tensions and macroeconomic turmoil.

Operating costs are expected to have increased in the to-be-reported quarter due to rising compensation costs, return to office costs, and rising selling, general and administrative cost. This is expected to have hurt Cognizant’s bottom line in the third quarter. Industry supply-chain constraints are also expected to have negatively impacted the company’s growth in the to-be-reported quarter.

What Our Model Says

Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Cognizant currently has an Earnings ESP of -0.29% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies worth considering, as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

ZoomInfo Technologies ZI currently has an Earnings ESP of +1.27% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

ZI shares have lost 29.6% in the year-to-date period compared with the Zacks Computer - Integrated Systems industry’s decline of 5.3%.

Tencent Music Entertainment Group TME has an Earnings ESP of +4.76% and a Zacks Rank #2 at present.

TME shares have lost 46.4% in the year-to-date period compared with the Zacks Internet - Content industry’s decline of 35.5%.


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