Cognizant sees strong FY11 on robust client spending

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.

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 USD 60 billion outsourcing sector.

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

Analysts on average were looking for earnings of USD 2.70 a share, on sales of USD 5.74 billion, for the year, according to Thomson Reuters I/B/E/S.

"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 USD 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 USD 1.38 billion to USD 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 USD 1.36 billion.

Analysts on average were expecting earnings of 64 cents per share, on revenue of USD 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 USD 75.42 on Friday on Nasdaq.