Cognizant - PINC Result Review

Revenues surge 10%QoQ to USD1,217mn, outperforming its guidance by 3.6%. Full year revenue guidance for CY10 revised upwards yet again; 39%YoY growth to USD4.55bn.

* Strong sequential growth despite a stellar performance in Q2CY10
* Broad based growth across verticals
* Sustainable operating margins in the near term.
* Uptick in discretionary spend in US led by pent up demand; healthy client and employee addition.

Cognizant delivered a stellar performance yet again in CY10. This is led by clients' focus to increase investments in IT services. Cognizant's USD revenue guidance of 39%YoY growth for CY10 is way higher than Indian IT bellwether Infosys which has guided for 24-25%YoY growth in USD revenues. The management is cautiously optimistic about the demand environment going forward which has led to a conservative guidance for Q4CY10. Infosys' revenue growth guidance for Q3FY10 is in the range of 3.4-4.4%QoQ.

The increased demand for offshoring will continue to boost volumes for the entire top tier IT vendors. We have revised our target price upwards for most of the tier-1 Indian IT vendors in this quarter. The improved revenue visibility and large deal pipeline has led to this revision.

Source : Equity Bulls

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