Ravi Kumar's appointment as Cognizant CEO can be a 'consensus, confidence builder': Wedbush’s Moshe Katri

Ravi Kumar's appointment will be important “with the objective of tackling/resolving the company's ongoing challenges, including record attrition rates, delivery constraints as well as lagging peer-like growth,” said Moshe Katri, Managing Director of Equity Research at Wedbush Securities

The appointment of Infosys veteran Ravi Kumar S as the Chief Executive Officer of Cognizant effective immediately (January 12) will be an important event with the object of resolving the company’s ongoing challenges, said Moshe Katri, Managing Director of Equity Research at Wedbush Securities in a note today.

The appointment will be important “with the objective of tackling/resolving the company's ongoing challenges, including record attrition rates, delivery constraints as well as lagging peer-like growth,” he said.

Kumar’s appointment, Katri said, would be a ‘consensus, confidence builder’ where he can attract talent, a matter which has been a significant challenge at Cognizant in the last few years.

The new CEO replaces Brian Humphries, who would be stepping down from his role as Cognizant’s CEO. The IT company has seen a spate of top-level of exits since the time Humphries took charge in 2019.

Read: Cognizant appoints former Infosys president Ravi Kumar as CEO

Meanwhile, Katri has previously called out the Board of Cognizant for inaction and said it had a fiduciary duty, due to the company’s multi-year underperformance, and that a change in leadership was warranted. 

The company's underperformance, Katri had said at the time, would increase pressure on the board to examine performance and execution, and that it could potentially lead to executive role changes.

When the announcement of Kumar’s exit from Infosys and appointment as President of Cognizant Americas was announced, he was believed to be pipped as a potential candidate as well.

Along with announcing a number of new appointments, the company revised its guidance lower.

For the full year (the company follows the calendar year), the company has revised its guidance.

It expects the 2022 year’s adjusted operating margin at 15.3 percent, as compared to 15.6 percent that it previously forecast. “This updated guidance includes a negative impact on Adjusted Operating Margin of approximately 30 basis points,” it said.

For Q4FY22, Cognizant revised its revenue from expectations of $4.72-$4.77 billion to $4.8 billion, and for the full year from $19.3 billion to $19.4 billion.

In two previous quarters, the company had pared down its revenue growth guidance.

"The company also revised is CY22 guidance lower, reflecting likely, persisting delivery challenges in the US. Bottom line, the stock continues to trade at a significant discount to its Tier I offshore peers,” Katri said.