UPDATE 5-Cognizant raises 2010 outlook on robust quarter

* Q1 adj EPS $0.53 vs est $0.48

* Q1 rev beats estimates

* Increases 2010 sales, profit outlook

* Shares rise as much as 3 percent
(Adds CEO interview)

By S. John Tilak

BANGALORE, May 4 (BestGrowthStock) – Cognizant Technology Solutions
Corp’s (CTSH.O: ) solid first-quarter results prompted the IT
services provider to increase its outlook for the year,
underscoring market share gains and the recovery in the
financial services sector.

Shares of the company climbed 3 percent in early Nasdaq
trade, extending their strong run, but lost their gains as the
broader market fell. Since the start of the year, the stock is
up 15 percent, outperforming an 8 percent rise in the S&P 500
(.SPX: ) index.

In the first quarter, revenue from financial services, its
biggest segment, grew 5 percent from the previous quarter and
was up 20 percent year-over-year.

“The current demand for financial services continues to be
fairly broad,” Chief Financial Officer Gordon Coburn said on a
conference call with analysts.

Cognizant posted a forecast-beating profit for the fifth
straight quarter.

For 2010, the company projected revenue growth of at least
25 percent. Some Wall Street analysts were expecting Cognizant
to give a growth outlook of 22 percent.

“It is bullish that, after only one quarter into the year,
Cognizant raised its 2010 revenue growth guidance from ‘at
least’ 20 percent to ‘at least’ 25 percent,” Sanford C.
Bernstein analyst Rod Bourgeois said.

The company could achieve 31.5 percent revenue growth in
2010 in a scenario that’s realistic, Bourgeois said.

The current revenue outlook implies a slowdown of growth in
the second half of the year.

“We are factoring in some conservatism in the second half
of this year,” Chief Executive Francisco D’Souza said in an
interview with Reuters.

The company has been benefiting from some pent-up demand,
D’Souza said. “We think it’s possible that there could be some
softness in the back half of the year on the discretionary
spending side.”

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For CEO interview, click on [ID:nWNAB6074]

For a graphic, click on http://link.reuters.com/rub52k

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The results follow a strong showing by India-based rivals
such as Tata Consultancy (TCS.BO: ), Infosys Technologies
(INFY.BO: ) and Wipro (WIPR.BO: ).

Cognizant has been growing faster than its competitors —
which include U.S. firms like Accenture (ACN.N: ),
Hewlett-Packard (HPQ.N: ) and IBM (IBM.N: ) — and taking market
share.

“We think overall results and guidance should be taken as
positive,” J.P. Morgan analyst Tien-tsin Huang wrote in a note
to clients. “We continue to prefer Cognizant relative to peers
given its premium growth.”

The company plans to hire aggressively throughout the rest
of the year, D’Souza said.

“Given that we’ve revised our guidance by anticipation is
that we’ll clearly continue to hire throughout the rest of this
year,” CEO D’Souza said in the interview.

Adjusted operating margins came in at 20.5 percent, ahead
of its target operating margins of 19 to 20 percent. For the
second quarter and full year, the company plans to stick to its
target operating range.

First-quarter net income rose to $151.5 million, or 49
cents a share, from $113.1 million, or 38 cents a share, a year
earlier. Excluding items, earnings were 53 cents a share.

Revenue rose 29 percent to $959.7 million.

Analysts expected earnings of 48 cents a share, excluding
exceptional items, on revenue of $939.1 million, according to
Thomson Reuters I/B/E/S.

For the year, it forecast earnings of at least $2.26 a
share, excluding items, on revenue of at least $4.1 billion.

In February, the company had forecast earnings of at least
$2.19 a share, excluding items, on revenue of at least $3.94
billion, or 20 percent growth.

Analysts are looking for earnings of $2.08 a share,
excluding items, on revenue of $4 billion.

For the second quarter, it projected earnings of 55 cents a
share, excluding items, on revenue of at least $1.02 billion.

Analysts are expecting earnings of 51 cents a share,
excluding items, on revenue of $979.4 million.

Cognizant shares, which have doubled in value in the last
52 weeks and pushed the company’s market cap to $15.30 billion,
were down 16 cents at $51.86 in Tuesday afternoon trade. They
touched a high of $53.30 earlier in the day.

Stock Report

(Reporting by S. John Tilak; Editing by Maju Samuel, Ratul Ray
Chaudhuri)

UPDATE 5-Cognizant raises 2010 outlook on robust quarter