Cognizant Q3 Earnings Beat Estimates: Will Raised View Aid Shares?

Core Insights - Cognizant Technology Solutions (CTSH) reported non-GAAP earnings of $1.25 per share for Q3 2024, exceeding the Zacks Consensus Estimate by 9.65% and reflecting a year-over-year increase of 7.8% [1][2] - The company's revenues reached $5 billion, surpassing the consensus mark by 0.82%, with a year-over-year growth of 3% and a 2.7% increase at constant currency [2] Financial Performance - Bookings on a trailing 12-month basis declined by 2% year over year to $26.2 billion, with a book-to-bill ratio of approximately 1.3 times [3] - Financial services revenues, accounting for 29.5% of total revenues, increased by 0.7% year over year to $1.486 billion, driven by improved discretionary spending [5] - Health Sciences revenues, making up 30% of total revenues, rose by 7.8% year over year to $1.514 billion, supported by strong offerings and large deal wins [5] - Products and Resources revenues increased by 5% year over year to $1.22 billion, while Communications, Media and Technology revenues decreased by 3.7% to $816 million [6] Regional Performance - North America revenues grew by 3.8% year over year, contributing 74% to total revenues [6] - Revenues from Europe fell by 0.3% year over year, with the U.K. declining by 0.8% and Continental Europe increasing by 0.2% [7] - The Rest of the World saw a revenue increase of 4.3% year over year, contributing 6.8% to total revenues [7] Operating Metrics - Selling, general & administrative expenses as a percentage of revenues increased by 20 basis points year over year to 16.5% [8] - The company reported a GAAP operating margin of 14.6%, expanding by 60 basis points year over year [8] - Non-GAAP operating margin, adjusted for NextGen charges, was 15.3%, contracting by 20 basis points year over year [10] Balance Sheet - As of September 30, 2024, CTSH had cash and short-term investments of $2.02 billion, down from $2.2 billion as of June 30, 2024 [11] - Total debt increased to $1.2 billion from $623 million reported as of June 30, 2024 [11] - The company generated $847 million in cash from operations, compared to $262 million in the previous quarter [11] Future Guidance - For Q4 2024, Cognizant expects revenues between $5 billion and $5.1 billion, indicating growth of 5.1-7.1% [12] - For the full year 2024, revenues are projected to be in the range of $19.7-$19.8 billion, reflecting an increase of 1.6-2.1% [12] - Adjusted operating margin for 2024 is expected to be approximately 15.1%, unchanged year over year [13]