Technology stock

Cognizant Technology stock hits near 7-month low on tight forecasts

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Cognitive technology (NASDAQ: CTSH) the stock slipped to a nearly 7-month low on Thursday after the IT company lowered its forecast in its First Quarter Earnings Report.

The CTSH expects 2022 adj. EPS of $4.45-$4.55 vs. previous outlook of $4.46-$4.60. The consensus estimate is $4.56.

2022 revenue is expected to be $19.8-20.2 billion (+9-11% in constant currency) compared to previous guidance of $20-20.5 billion (+8.5-11 .5% in constant currency). The consensus estimate is $20.14 billion.

“Our updated constant currency guidance for 2022 includes better organic revenue growth prospects and a lower inorganic contribution, reflecting a disciplined acquisition strategy,” said Chief Financial Officer Jan Siegmund.

CTSH expects second-quarter revenue of $4.90 billion to $4.94 billion, up 6.8 to 7.8 percent, below the consensus estimate of $4.98 billion.

On a post-earnings call, CEO Brian Humphries said CTSH expects booking growth to accelerate in the second quarter and into 2022 given a healthy pipeline.

He said the labor market continues to experience attrition, supply and demand imbalances and inflationary pressures.

Voluntary attrition in Q1 was down 5 points to 26% on an annualized basis. “…we expect attrition to remain high for the year and increase in the second quarter, reflecting seasonality,” Humphries said.

Q1 operating margin was 15% vs. 15.2%, down ~20bps, impacted by higher compensation costs, including contractor costs.

Meanwhile, first-quarter revenue rose 9.7% to $4.8 billion. Financial services revenue grew 4.8% driven by demand for digital services, partially offset by customer focus on cost optimization. Healthcare revenue increased 8.1%, driven by increased demand among life sciences customers.

Products and Resources revenue increased 13.2%, helped by strong customer demand and acquisitions. Communications, media and technology revenue grew 18.1% on strong demand from digital native businesses.

CTSH stock is down 15.2% year-to-date.