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(Reuters) – Cognizant Technology Solutions Corp. has nearly halved its revenue forecast for 2019 after missing first-quarter results as the IT and outsourcing company faces stagnant demand in its financial and health sectors.
Stocks dropped nearly 6% after normal trading hours before reducing losses. They fell sharply just before markets closed after the publication of the results earlier than expected.
"Revenue performance is driven by both external factors, including the outsourcing of a few large financial services customers and lower spending by fully integrated healthcare customers, as Cognizant's own performance issues, "said new CEO Brian Humphries said in his first post-profit call.
The company's dependence on the financial services sector has weighed on overall revenue growth in recent quarters.
Chief Financial Officer Karen McLoughlin said the company was showing some caution in the banking sector over spending levels in the second half of the year.
The company expects revenue growth in 2019 to be between 3.6% and 5.1% in constant currency, compared to 7% to 9% previously.
Cognizant also lowered its adjusted earnings guidance for the full year and now expects a range of between $ 3.87 and $ 3.95 per share. Previously, he was expecting at least $ 4.40 per share.
"For some time we have been asking questions about the spending environment within EU banks and, to some extent, North American banks," said Darrin Peller. , analyst at Wolfe Research.
Cognizant expects a turnover of 4.16 billion US dollars and 4.20 billion US dollars in constant currencies for the current quarter. Analysts were expecting a turnover of 4.29 billion dollars.
The company is focused on cloud computing, cybersecurity and analytics to reduce IT dependency, where margins are being negated by customers who demand more work at lower cost.
Revenues for its financial services unit declined 1.7% to $ 1.44 billion in the first quarter, while health care services revenues increased nearly 4% to $ 1.17 billion, but missed the $ 1.20 billion forecast announced by three analysts surveyed by Refinitiv.
The total business figure reached $ 4.11 billion, but is below the expectations of the company and Wall Street.
Excluding items, the company reported earnings per share of 91 cents, with the average analyst estimate of $ 1.04 missing.
(Report by Sayanti Chakraborty in Bengaluru, edited by Bernard Orr and Sriraj Kalluvila)
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