Cognizant Technology Solutions Corporation (CTSH) has reported an 1.89 percent fall in profit for the quarter ended Dec. 31, 2016. The company has earned $416 million, or $0.68 a share in the quarter, compared with $424 million, or $0.69 a share for the same period last year. On an adjusted basis, earnings per share were at $0.87 for the quarter compared with $0.80 in the same period last year.
Revenue during the quarter grew 7.08 percent to $3,462 million from $3,233 million in the previous year period. Gross margin for the quarter contracted 23 basis points over the previous year period to 39.98 percent. Total expenses were 83.80 percent of quarterly revenues, up from 82.90 percent for the same period last year. That has resulted in a contraction of 90 basis points in operating margin to 16.20 percent.
Operating income for the quarter was $561 million, compared with $553 million in the previous year period.
However, the adjusted operating income for the quarter stood at $649 million compared to $632 million in the prior year period. At the same time, adjusted operating margin contracted 80 basis points in the quarter to 18.75 percent from 19.55 percent in the last year period.
"As we enter 2017, the time is right for us to accelerate the shift to digital services and solutions to meet the growing demands from our clients to transform their business models in the face of the rapid business and technology shifts disrupting their industries," said Francisco D'Souza, Chief Executive Officer. "To meet this opportunity, we are evolving our business model to focus on aggressively scaling our digital capabilities, driving efficiencies in our core business, and launching a robust capital return program. We believe these changes will enable us to deploy our world-class team to best serve our clients and enhance value for our shareholders."
For financial year 2017, Cognizant Technology Solutions Corp forecasts revenue to be in the range of $14,560 million to $14,840 million. The company forecasts diluted earnings per share to be $3.63 on adjusted basis.
For the first-quarter, Cognizant Technology Solutions Corp forecasts revenue to be in the range of $3,510 million to $3,550 million. On an adjusted basis, the company forecasts diluted earnings per share to be $0.83.
Working capital increases
Cognizant Technology Solutions Corporation has recorded an increase in the working capital over the last year. It stood at $6,182 million as at Dec. 31, 2016, up 19 percent or $987.10 million from $5,194.90 million on Dec. 31, 2015. Current ratio was at 3.56 as on Dec. 31, 2016, up from 2.91 on Dec. 31, 2015.
Days sales outstanding went up to 34 days for the quarter compared with 32 days for the same period last year.
At the same time, days payable outstanding was almost stable at 4 days for the quarter, when compared with the previous year period.
Debt comes down significantly
Cognizant Technology Solutions Corp has recorded a decline in total debt over the last one year. It stood at $878 million as on Dec. 31, 2016, down 31.57 percent or $405 million from $1,283 million on Dec. 31, 2015. Total debt was 6.16 percent of total assets as on Dec. 31, 2016, compared with 9.82 percent on Dec. 31, 2015. Debt to equity ratio was at 0.08 as on Dec. 31, 2016, down from 0.14 as on Dec. 31, 2015. Interest coverage ratio improved to 140.25 for the quarter from 110.60 for the same period last year.
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