November 5, 2008 / 4:44 PM / 10 years ago

UPDATE 2-Cognizant Q3 revenue surges; sees project delays

* Q3 of EPS $0.38 tops estimates by a cent

* Revenue $734.7 mln vs estimate $722.6 mln

* Sees Q4 revenue below estimates

* Reaffirms ‘08 outlook

* Shares fall as much as 6 pct (Recasts; adds details from the conference call)

Nov 5 (Reuters) - Information technology service provider Cognizant Technology Solutions Corp (CTSH.O) reported strong third-quarter revenue growth, but warned of project delays as it expects clients to push back their 2009 IT budgets.

“Projects which normally might get started in the fourth quarter in expectation of a first-quarter budget approval are unlikely to kick off during the fourth quarter,” Chief Executive Francisco D’Souza said on a conference call.

The company said it expects clients to finalize budgets at the end of the first quarter.

Cognizant, which gets close to half its overall revenue from the financial services sector, however reaffirmed its full-year outlook in spite of the worsening economic conditions.

The company forecast fourth-quarter earnings of at least 38 cents a share, which was in line with analysts’ estimates. It expects revenue of at least $746.7 million, missing market estimates of $750.4 million.

While implied revenue outlook for the fourth quarter suggests further slowing, it appears that the company will exit 2008 with enough revenue momentum to post growth of at least 6 percent into 2009 under a worst-case scenario, Goldman Sachs analyst Julio Quinteros Jr. said in a research note.

Shares of Cognizant, which provides low-cost software development services in India, fell as much as 6 percent to $19.67 in morning trade, but regained some of their losses to trade down 23 cents at $22.77 on Nasdaq.


Profit for the third quarter beat market estimates by a penny, helped by better-than-expected operating margin.

For the third-quarter, net income was $112.8 million, or 38 cents per share, compared with $96.2 million, or 32 cents per share. Revenue rose 31 percent to $734.7 million.

Analysts expected Cognizant to earn 37 cents a share, before special items, on revenue of $722.6 million, according to Reuters Estimates.

“We are working with clients across all sectors, including banking and financial services, to help with the twin challenges of simultaneously driving further cost savings while investing to capture new growth opportunities,” CEO D’Souza said.

The company’s non-GAAP operating margin was 20.8 percent, above its targeted 19 percent to 20 percent range.

Cognizant competes with India-based companies such as Tata Consultancy Services Ltd (TCS.BO), Infosys Technologies Ltd (INFY.BO) and Wipro Ltd (WIPR.BO).

American depository shares of Infosys, which had lowered its full-year outlook in October, were down more than 3 percent on Nasdaq.

For the press release, please double click [ID:nPnNY43965] . For the alerts, please double click [ID:nWNAB7965] . (Reporting by Purwa Naveen Raman in Bangalore; Editing by Saumyadeb Chakrabarty)

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