New Jersey headquartered, though very much India-centric, offshore services firm Cognizant looks like it is having to pedal harder to make its FY earnings guidance, raising its FY revenue outlook by nearly two percentage points but leaving EPS outlook all but flat. Management has now set its 2013 revenue target to ‘at least’ $8.74bn (+19% yoy) vs its original $8.60bn target (+17%) set at the beginning of the year and restated in May. FY EPS is expected to be ‘at least’ $3.96 per share (+15% yoy) vs $3.95 in earlier guidance.
The change in outlook came on the back of Q2 results (to 30th June) ahead of guidance, with revenues 20% higher yoy (+7.0% qoq) to $2.16bn, beating even TCS’s growth rate (see TCS off to a sprint). Cognizant’s operating margins, at 19.7%, were above the normal narrow range and the highest since 2005, mainly, it seems, due to a tighter back office, as SGA cost margins were almost a point lower qoq and nearly 3 points down yoy. Yet at first blush, the cautious view on FY EPS suggests that management expects increased margin pressure in H2, assuming, of course, back office costs remain firmly locked down.
As usual, we'll have much more to write about the India-centric IT services players – including their UK performance – in the next edition of OffshoreViews