Why Is Cognizant (CTSH) Up 8.3% Since Last Earnings Report?

Core Insights - Cognizant Technology Solutions reported strong Q3 2024 earnings, with non-GAAP earnings of $1.25 per share, exceeding estimates by 9.65% and showing a year-over-year increase of 7.8% [2] - Revenues reached $5 billion, surpassing consensus estimates by 0.82%, with a year-over-year growth of 3% and 2.7% at constant currency [2] - The company is heavily investing in AI, committing $1 billion to enhance its platforms and capabilities [4] Financial Performance - Bookings declined 2% year over year to $26.2 billion, with a book-to-bill ratio of approximately 1.3 times [3] - Financial services revenues increased by 0.7% year over year to $1.486 billion, while Health Sciences revenues rose by 7.8% to $1.514 billion [5] - Products and Resources revenues grew by 5% to $1.22 billion, while Communications, Media and Technology revenues decreased by 3.7% to $816 million [6] Regional Performance - North America revenues increased by 3.8% year over year, contributing 74% to total revenues [6] - Europe revenues fell by 0.3%, with the U.K. declining by 0.8% and Continental Europe increasing by 0.2% [7] - Revenues from the Rest of the World increased by 4.3% year over year, contributing 6.8% to total revenues [7] Operating Metrics - GAAP operating margin was reported at 14.6%, expanding by 60 basis points year over year [10] - Non-GAAP operating margin, adjusted for NextGen charges, was 15.3%, contracting by 20 basis points year over year [13] - Selling, general & administrative expenses as a percentage of revenues increased by 20 basis points to 16.5% [8] Balance Sheet and Cash Flow - Cash and short-term investments totaled $2.02 billion, down from $2.2 billion in the previous quarter [14] - Total debt increased to $1.2 billion from $623 million [14] - Cash generated from operations was $847 million, significantly up from $262 million in the previous quarter [15] - Free cash flow was reported at $791 million, compared to $183 million in the prior quarter [16] Guidance and Outlook - For Q4 2024, revenues are expected to be between $5 billion and $5.1 billion, indicating growth of 5.1-7.1% [17] - 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% [17] - Adjusted operating margin for 2024 is expected to be approximately 15.1%, unchanged year over year [19] - Adjusted earnings per share for 2024 are anticipated to be between $4.63 and $4.67 [20] Market Position - Cognizant has a Zacks Rank 2 (Buy), indicating expectations for above-average returns in the coming months [23] - The stock has an average Growth Score of C, a Momentum Score of F, and a Value Score of B, resulting in an aggregate VGM Score of C [22]