Cognizant sees strong FY11 on robust client spending

Cognizant sees strong FY11 on robust client spending

Bangalore: IT services provider Cognizant Technology Solutions Corp forecast 2011 results above Wall Street estimates, after beating the market with a solid fourth quarter, as it continues to ride the recovery wave seen by its clients.

“As our clients continue to recover from the recent economic turmoil, it’s clear that our industry stands at yet another inflection point," chief executive Francisco D’Souza said in a statement.

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In January, Infosys Technologies , India’s second-largest technology company, had said the outlook for global economic growth was sluggish - sparking worries about the outlook for India’s $60 billion outsourcing sector.

Cognizant, whose rivals include Tata Consultancy Services (TCS) and Infosys, forecast 2011 adjusted earnings of $2.85 a share, on revenue of at least $5.79 billion.

Analysts on average were looking for earnings of $2.70 a share, on sales of $5.74 billion, for the year, according to Reuters.

“I am sure there is enough padding within this guidance for them to beat it," Ambit Cap analyst Subhashini Gurumurthy told Reuters.

Cognizant is known for its conservative forecasts and has comfortably trumped estimates for eight straight quarters now.

Wipro in sight

Cognizant, which posted revenue of $1.31 billion for the fourth quarter, forecast a 26% revenue growth for 2011. This brings the company in touching distance of Wipro, India’s No. 3 software services exporter.

Wipro, which met third-quarter profit forecasts with a 10% rise, has been struggling to keep up with its larger competitors, TCS and Infosys, in winning big outsourcing contracts.

Wipro had forecast IT services revenue of $1.38 billion to $1.41 billion for the fiscal fourth quarter.

Cognizant also forecast first-quarter adjusted earnings of 67 cents a share, on revenue of at least $1.36 billion.

Analysts on average were expecting earnings of 64 cents per share, on revenue of $1.31 billion.

“I think the first-quarter growth outlook is a little lower than what I would have expected but that could also be because of the conservative nature of the management," analyst Gurumurthy said.

Cognizant shares fell 1% before the bell on Monday. They closed at $75.42 on Friday on Nasdaq.