Cognizant Set to Report Q4 Earnings: What's in Store for the Stock?

Cognizant Technology Solutions CTSH is scheduled to report its fourth-quarter 2024 results on Feb. 05.

The Zacks Consensus Estimate for earnings is pegged at $1.13 per share, which has increased by a penny in the past 30 days. This indicates a decline of 4.24% from the figure reported in the year-ago quarter. 

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Cognizant expects fourth-quarter 2024 revenues between $5 billion and $5.1 billion, indicating growth of 5.1%-7.1% (an increase of 4.8% to 6.8% on a cc basis). Acquisitions are expected to have contributed 200 bps in the to-be-reported quarter. 

Cognizant Technology Solutions Corporation Price and EPS Surprise

Cognizant Technology Solutions Corporation price-eps-surprise | Cognizant Technology Solutions Corporation Quote

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $5.06 billion, indicating a year-over-year increase of 6.40%.

Cognizant’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.12%.

Let’s see how things have shaped up for the upcoming announcement.

Factors to Note

Cognizant’s fourth-quarter 2024 performance is likely to have benefited from an expanding clientele and a robust pipeline that includes a favorable mix of new opportunities.

In the third quarter of 2024, CTSH signed six deals exceeding $100 million each, highlighting its ability to win large and strategic contracts. In total, 19 large deals have been signed in 2024, outpacing the 17 deals secured in 2023. This is likely to have contributed to the to-be-reported quarter’s performance as well.

The company’s robust network of partners, which includes Gilead Sciences GILD, McDonald’s MCD and CrowdStrike CRWD, is likely to have driven growth during the fourth quarter.

Cognizant recently announced its collaboration with Gilead Sciences to expand their partnership. They will leverage machine learning, generative AI, and advanced technology solutions to enhance operational efficiencies, cost savings, and digital transformation across Gilead’s value chain. Benefits from this partnership are likely to have been reflected in the to-be-reported quarter’s performance.

In January, Cognizant and McDonald’s announced a multi-year extension of their strategic partnership to enhance staff enablement, customer experience, and operational efficiency through advanced technologies like Cloud, Enterprise AI, and Generative AI. This is likely to have strengthened Cognizant’s leadership in AI and Cloud solutions, driving growth and expanding its market presence in the to-be-reported quarter.

Cognizant also announced its partnership with CrowdStrike to deliver AI-powered cybersecurity services, leveraging the CrowdStrike Falcon platform and Cognizant Neuro Cybersecurity to enhance enterprise security transformation. This will boost Cognizant’s position in the growing cybersecurity market, offering advanced solutions to improve client security.

Cognizant’s investment in AI, including platforms like Neuro IT Ops and Flowsource, is expected to drive growth as more clients adopt AI-driven automation, enhance their operations, and improve productivity.

The growing demand for GenAI solutions across industries like financial services, healthcare, and manufacturing is expected to provide continued growth opportunities, particularly in areas like fraud detection, medical imaging, and predictive maintenance.

CTSH’s NextGen initiative is expected to have played a pivotal role in enhancing operational efficiency in the to-be-reported quarter.

However, challenges, including tight discretionary spending in the manufacturing, logistics, and telecom sectors and software spending weakness in Europe, are expected to have hurt spending rates and affected top-line growth in the to-be-reported quarter.

Cognizant currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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