Tag Archives: ctsh

Epam Jumps 9% As Q4 Beats; Can Stock Challenge India Outsourcers?

The stocks of Eastern European-rooted IT outsourcing companies, including Epam Systems, have seen more downside in recent months than the India-centric ones. But Epam just had a great day. Newton, Penn.-based Epam’s ( EPAM ) stock jumped 14% early Thursday and kept most of that gain through the day, as investors responded to a consensus-beating fourth quarter report that included a 26% revenue surge and mixed guidance. Epam closed up 9.3% in the stock market today at 65.67, still 22% off an all-time high set Dec. 17 at 84.41. The company went public priced at 12 in January 2012. Specializing in software development and testing for tech vendors, EPAM was founded by two Belarusians, one in Princeton. N.J., and the other in Minsk. Founded in Moscow, Luxoft Holding ( LXFT ), now headquartered in Switzerland, was up 2% Thursday near 51, still 36% off its its Dec. 8 record high of 80.64. Luxoft maintained half its workforce in Ukraine before war broke out between the government and Russian-backed rebels. It still employs thousands in Eastern Europe as it grows its presence there, in Western Europe and elsewhere. Two of the largest IT consulting and business process outsourcing (BPO) firms, U.S.-based Cognizant Technology Solutions (CTSH) and India-based Infosys ( INFY ), are trading 19% and 15% below their 52-week high marks, respectively. Cognizant fell 1.1% to 56.01 Thursday and Infosys 0.4% to 16.41. Infosys holds the highest IBD Composite Rating of the bunch, 82 out of a possible 99. Cognizant gets a 79, as does Epam. Luxoft has a 65. While all four firms support employees outside their workforce bases, they have a more important thing in common: All four look to the U.S. for a plurality, if not a majority, of their revenue. “Epam’s competitive differentiation comes from its highly educated workforce in Eastern Europe and Russia, nearly all of whom hold a master’s equivalent university degree in math, science or engineering,” said Baron Global Advantage Fund ( BGAFX ) portfolio manager Alex Umansky in a Dec. 31 newsletter. “In contrast, most India-based competitors predominantly rely upon recent college graduates with limited experience.” The difference, he said, allows Epam “to work on higher-value client projects with stronger pricing power than peers” and makes Epam “well-suited” to benefit from rising corporate spending on SMAC, or social, mobile analytics and cloud technologies. Another outsourcer, neither Eastern Europe nor India oriented, ManTech International ( MANT ), rose 1.5% to close at 27.44 Thursday after rallying as high as 29.14 in the morning. ManTech is 22% off a nearly three-year high set exactly one year ago today, Feb. 18. ManTech specializes in highly sensitive IT for U.S. defense and intelligence agencies. After Wednesday’s close, ManTech offered revenue guidance up 5% for 2016, following a 46% slide in sales from 2011 through 2015, prompting Cowen analyst Gautam Khanna to suggest in a Thursday research note that “growth finally appears plausible.” For Q4, ManTech said diluted EPS fell to 37 cents from 39 cents a year earlier, on revenue of $402 million, down from $411 million in the year before. For the full year, diluted earnings rose to $1.36 per share from $1.27, on sales of $1.55 billion, down from $1.77 billion in 2014. As for Epam Systems, it earned 78 cents per share minus items in Q4, up 26% from a year earlier, beating Wall Street analysts polled by Thomson Reuters by 5 cents, on revenue up 29% to $260 million, beating analyst views by about $9 million. Epam guided adjusted Q1 EPS to 70 cents, short of analyst expectations of 72 cents, on revenue up 29% to $258 million, beating Wall Steet’s $250 million estimate. For the year, it guided adjusted EPS to $3.20 vs. analysts’ $3.16, on revenue up at least 26% to $1.151 billion, beating Wall Street’s $1.122 billion.

Cognizant ‘Throws Gas’ On Fire Burning Software Stocks

A big outsourcing company with a broad landscape, Cognizant Technology Solutions ( CTSH ) threw “gas on a bonfire” burning software stocks by warning of weakness in information technology for the banking and health care industries, said investment bank Evercore ISI. “Cognizant specifically highlighted a weakened demand environment in the financial services and health care sectors as key drivers behind disappointing” Q1 and 2016 guidance, Evercore ISI analyst Kirk Materne wrote in a research note Tuesday. Cognizant on Monday posted Q4 earnings that beat analysts, but it disappointed investors with guidance below Wall Street estimates, sending Cognizant stock down 7.7% Monday. And Cognizant stock was down another 3.3% in midday trading in the stock market today , at a 13-month low near 52. IT business process outsourcing (BPO) rivals Infosys ( INFY ) and Accenture ( ACN ) were each down about 2% midday Tuesday. And IBM ( IBM ) stock was down more than 1.5% Tuesday. Its new IBM Watson Health is geared specifically to getting hospitals and medical practices migrating toward better electronic health records. Health care software vendor Athenahealth ( ATHN ), which has been struggling near seven-month lows, was down 1%. “Rising medical costs, consumerization of health care and a changing regulatory environment, among other things, are driving industry consolidation in the payer industry,” said Cognizant President Gordon Coburn in the company’s earnings conference call with analysts. “We’re seeing some slowdown in our health care practice due to this consolidation, particularly in the early part of this year, as reflected in our Q1 guidance. “That said, we remain optimistic about the long-term opportunities within the payer segment and are quite encouraged by the large deal pipeline in this area for 2016. As the health care industry shifts from fee-for-service to value-based care models, health care organizations are simultaneously looking for new ways to deliver consumer-centric care while driving operational efficiencies.”

Cognizant Misses Q1 Guidance As Q4 EPS Beats; Xerox BPO Lurks

Highly rated business process outsourcing firm Cognizant Technology Solutions gapped down 8% after the Monday stock market opening bell, shortly after management disappointed investors with guidance lower than Wall Street expected for the first quarter and 2016. Cognizant ( CTSH ) beat analysts estimates for Q4 earnings growth and came in short of analysts’ revenue expectations. Its stock fell as low as 53.46 early Monday in a rough market, 23% below its all-time high 69.80 reached Oct. 28. Shares were down 7% midday in the stock market today . Cognizant stock enjoys a high IBD Composite Rating of 90, meaning it’s performing better than 90% of stocks across a variety of metrics. That’s a hair better ranking than its larger business process outsourcing (BPO) rivals Infosys ( INFY ), somewhat better than Accenture ( ACN ) and far better than IBM ( IBM ). Like Cognizant with huge operations in India, Infosys was down 5% at midday Monday. Accenture about 4.5% and IBM was off 1%. A new concern for BPO companies — not that they haven’t been competing already — is Xerox ‘s ( XRX ) BPO spin-off, announced just 10 days ago. Xerox has been offering outsourcing for years, but as a free-standing publicly traded company its BPO is likely to receive heightened attention in the market. Cognizant declines to discuss Xerox, a spokeswoman said. Xerox stock was down about 5% at midday. Cognizant said the current Q1 earnings per share should reach 78-80 cents on revenue of $3.18 billion to $3.24 billion. Analysts polled by Thomson Reuters thought Cognizant could do better on earnings, expecting adjusted EPS up 12% to 81 cents from 71 cents a year ago, on sales up 14% to $3.319 billion from $2.911 billion in Q1 2015. For Q4 2015, Cognizant said it earned 80 cents per share minus items, up 19.4% from 67 cents a year earlier, on revenue up 17.9% to $3.23 billion. Analysts polled by Thomson Reuters had on average been expecting 78-cents EPS minus items on $3.24 billion in revenue. “Our cash and investment balances, net of debt, grew by $1.5 billion during 2015 due to our strong business performance and strong cash flows,” said CFO Karen McLoughlin in Cognizant’s earnings release. She said Cognizant spent more than $375 million buying back stock in 2015, “reflecting our commitment to drive shareholder value.” Said President Gordon Coburn: “While digital opportunities significantly expand our addressable market, our rapidly growing consulting, infrastructure and business process services and geographic market expansion, continue to be solid drivers of demand for our services.” Cognizant and Infosys recovered in December from heavy flooding in Chennai, India, where they employ tens of thousands of workers.