Here are some highlights from a recent Prudential report on Cognizant in which they increased their Cognizant target price to $80.
Vertical growth (year ovr year):
* Financial Services grew in excess of +56% (48% of revenue),
* Health Care by over +85% (22% of revenue),
* Retail/Manufacturing/Logistics grew +38% (16% of revenue), and
* TMT by +62% (14% of revenue).
Services: For the quarter, application management accounted for 51% of revenue, and application development chipped in the remaining 49%, both grew +22% and +14%, respectively.
Markets: From a geographical standpoint, North America was responsible for 87% of revenue, Europe for 12%, and the remainder being attributable to the Asian Market. Cognizant experienced very strong interest for SAP systems in Europe and earned numerous multi-year, multi-location wins in this line of business.
New Clients: Added 36 new clients for total active clients of 270. They added 5 'strategic clients' (for total 77), a category that Cognizant reserves for clients capable of becoming significant future sources of revenue. On the other hand, 24-accounts terminated their work with CTSH all of which were considered insignificant losses by management.
Headcount: Cognizant had net new hires of 2,900, a 10,400 worker increase over the prior year’s period. Management is confident the company remains on track to meet its FY06 goal of 36,000 global employees from it's current 31,000 employees.
Succssion plan: Effect January 1, 2007, current CEO Lakshmi Narayanan will hand over the reins to COO Francisco D’Souza, who will assume the joint role of CEO, President. Mr. Narayanan will become Vice Chairman Board. Also Gordan Coburn will be promoted to CFO, operating officer.
Revenue growth: Management raised its FY06 revenue guidance by $70M to “at least” $1.37B, representing a 54.6% Y/Y acceleration. Management expects this top-line growth to generate Q3 EPS of $0.38 and FY06 EPS of $1.45, an increase of $0.01 Q/Q and $0.40 Y/Y, respectively. |
