Cognizant Forecasts Revenue Above Estimates as IT Spending Rises

IT services provider Cognizant Technology Solutions Corp forecast current-quarter revenue and profit above analysts' estimates due to a rise in spending by financial services and healthcare customers.

The company also reported higher-than-expected revenue and profit for the third quarter as revenue rose from its North American and European clients.

North America accounts for about three-quarters of the company's total revenue, while Europe makes up for about 18 percent.

Cognizant has been trying to boost growth in its slowing healthcare business, its second largest. Its healthcare clients include insurers, hospitals and some state-run exchanges set up under the U.S. Affordable Care Act, also known as Obamacare.

Growth in the business, which accounts for about 25 percent of total revenue, has been slowing in the past year.

Cognizant's healthcare revenue growth slowed significantly to 9.2 percent in the third quarter from 24 percent a year earlier and 19 percent in the second quarter.

The company said in September that it was acquiring healthcare IT services provider TriZetto Corp for $2.7 billion, its biggest deal ever, to boost its healthcare business.

Cognizant forecast on Wednesday revenue of $2.61 billion-$2.64 billion and adjusted profit of at least 63 cents per share for the fourth quarter.

Analysts on average were expecting a profit of 59 cents per share and revenue of $2.58 billion, according to Thomson Reuters I/B/E/S.

Cognizant's net income rose to $355.6 million, or 58 cents per share, in the third quarter ended Sept. 30 from $319.6 million, or 53 cents per share, a year earlier.

Revenue rose about 12 percent to $2.58 billion.

Analysts on average had expected a profit of 59 cents per share and revenue of $2.57 billion.

Rival Tata Consultancy Services Ltd reported a lower-than expected quarterly profit last month, while Infosys Ltd's quarterly profit beat the average analyst estimate.

Cognizant's shares closed at $48.49 on the Nasdaq on Tuesday.

© Thomson Reuters 2014