Cognizant (NASDAQ:CTSH) had an encouraging fourth-quarter earnings report and conference call Wednesday morning that left me feeling confident in the growth ahead for this info-tech consultant.
Fourth-quarter profit jumped 16%, boosted by a revenue increase of 30% from a year ago and 3.9% from the previous quarter. Considering tough economic conditions in Europe, where revenues declined from the third quarter, the company was very pleased with the overall revenue rise to $1.66 billion despite just missing Wall Street’s projections of $1.67 billion.
Earnings topped estimates by a penny, coming in at 78 a share. Operating margins narrowed slightly to 18.5% from 18.6%, but for good reason because the company continued to invest heavily in new associates.
Management expects 2012 earnings to be $3.43 a share, a gain of 20% and pretty much in line with forecasts. This projection does not assume any economic recovery in Europe, so the company could do even better should customers’ discretionary spending increase.
Longer-term, management remains quite confident, particularly in its IT outsourcing products. While newer services such as transactions processing aren’t yet able to move the revenue needle, they will be important in the future. Customer satisfaction also remains quite high, according to company surveys, and CTSH added a record 25 new strategic clients in 2011.
The stock has underperformed the market a bit in recent months, primarily due to concerns about Europe. Even now, the shares are down a little after earnings on the slight revenue miss, conservative sales guidance and changes in management that were also announced with earnings. However, Cognizant continues to post strong results and appears ready to show consistent growth in 2012 with the real possibility conditions will improve enough that the company could exceed expectations.
Synchronoss Technologies (NASDAQ:SNCR) had an outstanding fourth quarter with profits of $8.2 million on $62.2 million in revenue — rebounding from a loss of $4 million in sales of $49.2 million a year ago.
Excluding one-time items, SNCR earned 34 cents a share, which was 5 cents higher than company guidance and well ahead of Wall Street’s estimates of 23 cents. Revenues grew 22% to $61.6 million, driven by an increase in the number of connected devices and the company’s further expansion of its customer base beyond AT&T (NYSE:T). Business outside AT&T was 48% of revenues, up nicely from 40% a year ago. Margins widened on higher volumes and the lessening impact of investments the company previously made to build its platform.
The quarter showed SNCR continues to benefit from growth in the smartphone market, and the company has plans to keep building out its capabilities beyond activation and synchronization to offer carriers more services in a market that is becoming increasingly competitive.
SNCR’s outlook for 2012 is strong, as management guided to revenues of $280 million to $290 million, representing growth of 22% to 26%. Higher expected gross margins will be offset by an increase in operating expenses, and operating margins for the year will be flat from 2011 at 22% to 23%. Earnings of $1.07 to $1.11 are better than the current consensus estimate of $1.06, and that range could prove to be conservative, as the company’s margin guidance appears to be on the low side in light of the expected higher revenues.
The stock moved nicely on the news, jumping as much as 8% earlier after Wednesday’s announcement before finishing ahead 4.2%.
Evercore (NYSE:EVR) completed a solid 2011 by reporting a 19% increase fourth-quarter profits and by beating expectations by earning 32 cents a share. Revenues of $111.6 million were up from $101.6 million last year, and investment banking revenue increased 19%. Results were hurt by some deals that closed early in the third quarter instead of in the fourth quarter as expected.
For all of 2011, revenues increased 39% to $524.2 million, and adjusted earnings rose to $1.48 from 95 cents. Management explained investment banking operating margins of 22.8% would have been closer to 28% had it not been for investments in the company’s equity research and private client business. This translates into a pretty hefty 50 cents of earnings on annual basis. While these businesses are expensive now, management remains confident they have very good potential.
Adjusted operating income for investment banking for all of 2011 was $95.6 million, up 45% from 2010. The company’s asset management business saw an approximate 5% decline in revenues from the previous quarter due to client withdrawals. For the year, however, the unit realized operating income of $10.3 million, up sharply from $1.3 million in 2010 — thanks to acquisitions.
In addition to operational improvements, management is confident in the improving M&A environment, which it believes is still in the early stages of a multi-year upswing. The company oversaw $101.8 billion in announced transactions last year, and founder Roger Altman said he believes overall activity will be more robust this year.
EVR did not outperform as well as I’d hoped in 2011, but growth prospects still look firmly in place, and I have a lot of confidence in it for the year ahead.