Leadership Change At CTSH

Cognizant Technology Services (CTSH) rose 5.8% yesterday after it replaced CEO Brian Humphries with Ravi Kumar,  a 20-year executive at Cognizant competitor Infosys (INFY) who most recently served as that company’s president.  While Mr. Humphries did a good job in growing Cognizant’s digital business, there was execution problems in his tenure. Infosys, on the other hand, has been a steady grower in recent years with the help of Mr. Kumar’s leadership.

Also helping the stock yesterday was the fact the company confirmed that it is confident that full-year revenues will come in at $4.8 billion, 1% above Wall Street’s projection. Although EPS guidance for the year was lowered to $4.38 to $4.40 compared to expectations of $4.43 to $4.46, the results show the company is getting past staffing issues that led to lower expectations for the quarter.

I believe this is a good move for CTSH and I conservatively think the company can earn $4.75 this year and $5.10 in 2024. The stock still looks cheap based on these earnings estimates. CTSH is now a buy under $65. My target is $80.