Businesses are always looking for ways to become more efficient, productive, and profitable. For years, IT consulting and outsourcing specialist Cognizant Technology Solutions (NASDAQ:CTSH) has made it its mission to help its clients get more out of the technology they use. Coming into its second-quarter financial report Wednesday morning, investors wanted to see signs that Cognizant's impressive past growth would continue, and they were curious as to which parts of the company would produce the best results and contribute the most toward Cognizant's overall success.
In the report, Cognizant reported record results, and boosted its future guidance as it sustained an impressive pace of expanding sales. Let's take a closer look at Cognizant, and see whether its latest performance is just the beginning of even better things to come.
Cognizant keeps climbing higher
Cognizant's second-quarter results included some favorable surprises from the IT consulting specialist. Revenue jumped almost 23%, to $3.09 billion, powering ahead at an even faster pace than the 20% rate that most investors had expected to see. Net income of $420 million climbed 13% from the year-ago quarter, and after accounting for stock-based compensation and acquisition-related charges, adjusted earnings of $0.79 per share were $0.06 higher than the consensus forecast among investors.
A closer look at Cognizant's business segments reveals that healthcare remained the most powerful force for overall growth. Revenue from healthcare soared 39% from the year-ago period, to $897 million, as it continues to catch-up to the larger financial services area. At $1.25 billion, sales from financial services were up a solid 18% from 2014's second quarter, with the manufacturing, retail, and logistics segment bringing up the rear with 12% year-over-year growth. Other sources of revenue saw a 20% boost.
The difference between the performance of Cognizant's North American and European operations once again made itself felt during the quarter. North American sales climbed by more than 25%, to $2.42 billion, but Europe's growth was limited to about 8%. Gains of 30% for Cognizant's rest-of-world segment were impressive, even though the IT consulting specialist gets relatively little revenue outside North America and Europe.
Cognizant's executives were impressed by the technology company's performance. CEO Francisco D'Souza said: "Our second-quarter sequential revenue increase in dollar terms was the strongest in our history. These results validate that our business strategy and our investments position us well to capture the emerging opportunities as clients look to transform into digital businesses."
President Gordon Coburn noted Cognizant's progress internally toward its overall goals, pointing to efforts "to optimize our existing services and aggressively invest in new services to enable clients to drive higher levels of operational efficiency."
Another brighter look at the year for Cognizant
As we saw last quarter, Cognizant's strong results were accompanied by an increase in the company's guidance for the full 2015 fiscal year. The tech company boosted its revenue projections by $100 million, to $12.33 billion, and it made a $0.07-per-share increase to its calls for adjusted earnings per share, now expecting an even $3.00 per share for the full year.
Moreover, guidance for the third quarter was in line with what most investors expected Cognizant to produce. The company thinks that it will post revenue of at least $3.14 billion, and adjusted earnings should come in around $0.75 per share.
Cognizant investors celebrated the company's report, sending the stock up by more than 6% in the first two hours of pre-market trading after the announcement. Trends in all of its key segments are pushing current and potential clients to look more closely at their technology needs. As long as a favorable economic environment gives those customers the means to make necessary upgrades to their IT systems, Cognizant Technology Solutions should be able to ride their coattails to even better results in future.