Cognizant Technology Solutions
CTSH
recently announced that it has entered into an agreement to acquire Dallas, TX-based consultancy services firm, AustinCSI. The deal, upon completion, will strengthen Cognizant’s footprint across the telecommunications, media, technology and automotive sectors.
AustinCSI boasts of a strong clientele and its domain expertise in enterprise cloud and data analytics will support Cognizant’s endeavors to expand consultancy and advisory services across its customer base. AustinCSI, once completed, will be Cognizant’s second acquisition this year.
Recently, Cognizant announced the acquisition of the professional services and application management practices of OneSource Virtual, a leading provider of
Workday
WDAY
services, solutions and products, for a preliminary purchase price of roughly $120 million.
OneSource Vital’s offerings complement Cognizant’s existing finance and HR advisory implementation services with Workday. The transaction will expand Cognizant’s capabilities in consulting, deployment and post-deployment support across North America and the United Kingdom. The transaction is expected to close by the end of the fourth quarter of 2022.
Acquisitions & Partnerships Aid Cognizant’s Prospects
Cognizant shares have outperformed the broader Zacks
Computer & Technology
sector year to date. While CTSH shares have declined 32.8%, the sector has dropped 33.1% over the same timeframe.
Cognizant Technology Solutions Corporation Price and Consensus
Cognizant Technology Solutions Corporation price-consensus-chart
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Cognizant Technology Solutions Corporation Quote
Revenue-accretive acquisitions and an expanding partner base that includes the likes of
Microsoft
MSFT
and
Qualcomm
QCOM
have been key catalysts.
Acquisitions have been an integral part of Cognizant’s growth story in recent years. The company spent $715 million in 2021 on acquisitions.
In the third quarter of 2022 (quarter ended Sep 30), acquisitions contributed 40 basis points (bps) of year-over-year revenue growth of 2.4% or 5.6% at constant currency (cc).
Cognizant reported third-quarter 2022 revenues of $4.86 billion, which however missed the Zacks Consensus Estimate by 2.94%. The reported figure was within management’s revenue guidance of $4.90 billion to $4.94 billion.
The year-over-year top-line growth was led by digital revenues, which accounted for 51% of revenues and increased 7% year over year. However, the digital revenue growth slowed down due to forex headwinds and elevated attrition, particularly in Europe. The divestiture of the Samlink subsidiary hurt revenue growth by 60 bps.
Nevertheless, Cognizant continues to benefit from an expanding clientele. In third-quarter 2022, clients added over the past year contributed $96 million in revenues.
Cognizant was recently selected by VodafoneZiggo as its managed services partner to consolidate and support VodafoneZiggo’s operations of IT and virtualized mobile network infrastructure. VodafoneZiggo, which is a 50:50 joint venture between Liberty Global and Vodafone Group, currently serves more than five million mobile business and consumer customers in The Netherlands.
Moreover, Cognizant recently announced the expansion of its partnership with Microsoft. The two companies recently showcased a new solution — the Cognizant Sustainability Accelerator, powered by the Microsoft Cloud and Microsoft Cloud for Sustainability — at COP27. The solution combines Cognizant’s deep experience in IoT and data analytics with Microsoft’s cloud capabilities.
Cognizant also expanded its collaboration with Qualcomm to accelerate enterprise digital transformation through a new 5G experience center in Atlanta, GA. The collaboration combines Cognizant’s expertise in 5G, IoT, cloud and data analytics with Qualcomm’s intelligent edge devices, AI and 5G connectivity solutions.
Cognizant expects to report fourth-quarter revenues between $4.72 billion and $4.77 billion, indicating growth of 2-3% on a cc basis. For 2022, revenues are now expected to be $19.3 billion, indicating an improvement of 7% on a cc basis reflecting the robust contribution from acquisitions and a strong partner base.
The Zacks Consensus Estimate for this Zacks Rank #4 (Sell) company’s 2022 revenues is pegged at $19.34 billion, indicating growth of 4.5% over the figure reported in 2021. The consensus mark for 2022 earnings is pegged at $4.46, down 1.8% over the past 30 days.
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