Reporting More Earnings News

We had a couple more strong earnings reports yesterday. So, let’s take a look at them.

Cognizant Technology Solutions (CTSH) reported third-quarter earnings per share (EPS) of $0.97 vs. $1.08 on flat revenues of $4.2 billion. EPS exceeded estimates by $0.90, while revenues beat expectations by 2.4%.

The company’s attempts to rejuvenate growth are working well, with the number of bookings now up 15% year to date, and digital revenues are up 13% in the third quarter. The under-the-surface improvements enabled the company to increase its 2020 EPS guidance from $3.48 to $3.58 to $3.63 to $3.67.

CTSH shares have made a strong comeback this year, and the strategies that CEO Brian Humphries put into place are starting to pay off. The company should be able to earn over $4 a share next year, and my $80 target remains realistic. I am raising my buy under price for CTSH to $70.

Valvoline (VVV) reported fourth-quarter EPS of $0.46 vs. $0.40, which was $0.10 better than expectations, as revenues rose a surprising 4% versus an expected 2% decline. The Quick Lube division continues to be a source of strength for the company, as same-store sales increased by 8.3% and operating income increased by 15% to $55 million. The company added 30 new locations in the quarter and will add another 140 to 160 in fiscal 2021. These new locations should drive future growth.

Despite flattish volumes, the lubricant division saw operating income increase to $81 million from $67 million with the aid of price increases.

Guidance for the September 2021 fiscal year was strong, as the company predicts EPS of $1.57 to $1.67, better than estimates of $1.54. VVV earned $1.48 a share in the fiscal year that just ended. However, VVV’s management did caution that its estimates assume that there will not be another shutdown of the economy due to COVID-19.

VVV still looks greatly undervalued at just over 12X the mid-point of the company’s guidance, given the growth in Quick Lube locations. The shares should do very well once COVID-19-related fears eventually lift. Buy VVV under $20. My target is $26.