Analysts want new Cognizant CEO Brian Humphries to show results soon

Analysts tracking the performance of Cognizant Tech­nology Solutions said the company must quickly overcome a “difficult period” it had been facing over the past year after its December quarter results did not match industry peers. 

“Since the new CEO Brian Humphries joined, the results (of his decisions) have not come yet. The company has been plagued with one or the other issue over the past year... but it is still in the initial transformation phase under the new CEO,” said Pareekh Jain, founder and lead analyst at EIIR Trend.

The New Jersey-based fi­rm said it expects net profit in 2021 to be $17.6-18.1 billion, at a growth rate of 5.5 per ce­nt-8.5 per cent, or 4.0-7.0 per cent in constant currency terms. Financial services’ rev­e­nue at the firm decreased 11.1 per cent YoY following the exit of a large customer in co­n­­tinental Europe. As a result, it recorded a reduction in re­venue of $107 million and ad­ditional expenses of $33 million.  Peter Bendor-Samuel, CEO at Everest Group, said several unique factors were involved in the said deal which may mean the underlying struggles were not endemic to other deals. 

In the quarter ended December 31, 2020, Cognizant posted 20 per cent decline in net profit to $316 million, against $395 million in the same period the year before.

The company’s full-year net profit declined 24 per cent to $1.39 billion against $1.84 billion last year, while revenue remained flat at $16.65 billion against $16.78 billion last year. The follows calendar year for accounting. 

Humphries joined Cogn­izant as CEO in 2019 and had been articulating his strategy over the past few quarters. “We see a meaningful opportunity for cross-selling in our existing accounts, given our refreshed client-facing teams, stronger portfolio, and enhanced account planning,” he said during a post-earnings conference call with analysts after reporting the fourth-quarter results on February 3. 

“Cognizant has to quickly overcome barriers of a difficult period which it has been going through for the past year in terms of attrition and ransomware attack, which has dented its image. It may have to reorient itself for faster growth trajectory. We see some endeavours in this direction and we have to wait and watch. Digitisation, transformation and cloud migrations are already happening. Creative destruction of legacy approaches can help Cogn­izant,” said D D Mishra, senior research director at Gartner.

In the September quarter, Cognizant reported attrition of 18 per cent. The company was also hit a ransomware attack that it confirmed in April last year.