Tuesday, May 9, 2017

Earnings - Vector Group, Cognizant Technology

Life got a bit in the way last week but here is a quick earnings recap for Vector Group(VGR), and Cognizant Technology Solutions(CTSH).

Vector Group(VGR) reported Q1 results with EPS of $-0.03 on revenues of $415 million. The loss is mainly due to extinguishing older 7.75% senior secured notes due 2021 with new notes of $850 million principal at 6.125% due 2025.  The company reported strong growth in their tobacco brands as consumers look for discounted options with a 6.2% YoY increase in retail shipments. The stock took a dive after earnings, but that's short term noise. The company is still well positioned within the real estate markets it transacts, and maybe it's looking like the other major tobacco companies have come close to their max price points in a lot of markets judging by the VGR's surge in discount brand sales. That's not exactly a great thought considering the portfolio is heavy in tobacco, but I think this is a short-term industry issue.

Cognizant Technology Solutions(CTSH) reported Q1 results with EPS of $0.92 on revenues of $3.55 billion(up 10.7% YoY).  The company also announced it's first quarterly cash dividend at a rate of $0.15/share. The company has taken note from Elliott Management's earlier call to re-align it's business as they are likely to incur re-structuring charges this year as it transforms into a high value digital transformation work company while shunning less profitable opportunities to target a 22% margin.  The company gave the following guidance for Q2 and 2017:

  • Second quarter 2017 revenue expected to be in the range of $3.63 billion to $3.68 billion.
  • Second quarter 2017 non-GAAP diluted EPS2 expected to be at least $0.89.
  • Full year 2017 revenue expected to be in the range of $14.56 billion to $14.84 billion.
  • Full year 2017 non-GAAP diluted EPS expected to be at least $3.64.
Here is what management had to say.

"We delivered solid results in the first quarter and continued to build our digital solutions portfolio, expand our skills, and enhance our engagements with clients," said Francisco D'Souza, Chief Executive Officer. "We're making good progress in accelerating Cognizant's shift to digital services and solutions to create value for clients and shareholders, positioning us well to achieve both our revenue and margin targets for this year."

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