Cognizant - Beats Consensus - Motilal Oswal

COGNIZANT 4QCY10: Beats consensus estimates; CY11 Guidance of at least 26% growth; Positive outlook on pricing uptick

4QCY10 revenue at US$1.31b was up 7.7% QoQ v/s consensus estimate of 4.9% growth (US$1.28b), and guidance of 4.4% sequential growth (US$1.27b).

Pricing improved 1.5% sequentially at Onsite and 2% at Offshore.

CY10 revenue at US$4.59b increased 40.1% YoY (v/s 25.3% for TCS and 23.8% for Infosys during the period).

Operating margin for the quarter was 18.7% (-10bp QoQ). Diluted EPS on a GAAP basis was US$0.66, and for the full year was US$2.37.

The company guided at an effective tax rate of 25% in CY11 (v/s 17.1% in 4QCY10).

Outstanding hedges stand at US$2.6b, including CY11 hedges worth US$780m at an average rate of Rs48/US$. Offshoring penetration in the ADM space stands at around 30%, whereas that in IT Infrastructure Services (IMS) and BPO is in low single digits (~5%). The company sees significant scope for improvement in each of these, with potential penetration of IT Infrastructure and BPO increasing to 30% in five years.

Source : Equity Bulls

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