What Caused Cognizant’s Shares to Rise 30% to Date in 2015?



Cognizant’s shares rose 30% to date in 2015

Previously in the series, we discussed that Cognizant (CTSH) not only managed to beat analysts’ expectations, it also raised its full-year 2015 guidance. In this part of the series, we’ll discuss how the company’s share price performed.

Earlier in this series, we discussed the guidance provided by the company for 4Q15. The guidance was in line with analysts’ estimates. This might have caused a slight fall in Cognizant’s share prices. They fell by 2.7%. The market might have been expecting more from the company.

[marketrealist-chart id=795188]

However, if we look at the performance of Cognizant’s share price since the beginning of 2015, it rose by 30%. In comparison, the S&P 500 IT Services Index only rose by 8%.

Article continues below advertisement

Gordon Coburn, Cognizant’s president, stated that the company’s impressive 3Q15 results are a reflection of its clients’ decision to optimize the company’s services to smooth their transition into a digital enterprise. At the same time, they optimized their investments in technology and business processes.

Cognizant expects revenue growth in 4Q15

In the last part in this series, we saw that unlike its peers—TCS (Tata Consultancy Services), Wipro (WIT), and Infosys (INFY)—Cognizant posted double-digit growth in its revenue and profits. For fiscal 4Q15, Cognizant expects 1.3% growth in its revenue. In contrast, its peers expect subdued revenue growth due to extended client furloughs.

In 3Q15, Cognizant’s cash reserves stood at ~$4 billion with $950 million in debt.

Cognizant’s strong revenue growth, stable financial position with reasonable debt, and growth in EPS (earnings per share) caused its stock price to rise in 2015, as the above price chart shows.

Cognizant accounts for 0.21% of the SPDR S&P 500 ETF Trust (SPY) and 0.98% of the Technology Select Sector SPDR Fund (XLY).


More From Market Realist