Cognizant (CTSH) To Post Q1 Earnings: What's In The Cards?

Cognizant Technology Solutions Corp. (NASDAQ:CTSH) is set to report first quarter 2016 results on May 6. Last quarter, it posted a positive earnings surprise of 4.23%. In the trailing four quarters, the company has recorded an average positive earnings surprise of 3.79%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Cognizant has been benefiting from its healthy exposure to fast-growing verticals like Financial Services and Healthcare. We expect Cognizant to benefit from strong demand for high quality, lower cost technology services especially in the outsourcing market. Rising demand for offshore services beyond traditional IT outsourcing namely, BPO (Business Process Outsourcing), KPO (Knowledge Process Outsourcing) and IT infrastructure services, also bodes well for the company.

However, it can be impacted by a slowdown in regions like North America or unfavorable changes in industries like financial services. Also, given the breakneck pace of evolution in the technology space, the company has to constantly fend off competition from peers like Accenture (NYSE:ACN) , Infosys (NYSE:INFY) and Wipro Ltd.

For the first quarter of 2016, the company expects revenues in a range of $3.18 billion to $3.24 billion. Non-GAAP earnings per share are expected to be in a band of 78 to 80 cents.

Earnings Whispers?

Our proven model does not conclusively show that Cognizant is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Cognizant has a 0.00% ESP because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 70 cents.

Zacks Rank: Cognizant currently has a Zacks Rank #3, which when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Here is a stock which you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Enable Midstream Partners, LP (NYSE:ENBL) has an Earnings ESP of +21.05% and a Zacks Rank #2.