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Cognizant Stock Fell after Weak Outlook and Earnings Miss

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Cognizant reported first-quarter results

Cognizant (CTSH) stock fell 7.7% on May 2 to close trading at $66.61. The stock is currently trading 12% above its 52-week low of $59.47 and 20% below its 52-week high of $83.35. Square announced its first-quarter results on May 2 with reported revenue of $4.11 billion, a rise of 5.1% YoY. Non-GAAP (generally accepted accounting principles) EPS fell 15% YoY to $0.91 in the first quarter.

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Wall Street expected Cognizant to post revenue of $4.16 million and EPS of $1.02 in the first quarter. Cognizant’s reported sales came in 1.2% below estimates, while EPS were 11% below estimates.

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Poor guidance also affected stock

Cognizant stated that it expects sales to increase between 3.6% and 5.1% in 2019, which is below its prior sales growth outlook between 7% and 9%. Cognizant now expects EPS between $3.87 and $3.95, significantly below the Wall Street forecast of $4.40.

Cognizant’s price drop means that the stock is trading 22% below analysts’ 12-month target estimates of $81.48. Out of 33 analysts covering Cognizant, 24 have “buy” recommendations, and nine have “hold” recommendations for the stock. There are no “sell” recommendations.

CTSH is trading at a forward PE multiple of 13.54x. In comparison to the company’s earnings decline of 2.4% in the current year, the stock looks overvalued despite losing close to 8% yesterday.

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