Cognizant Technology Solutions (CTSH) is no stranger to the acquisitions game. The provider of information technology, consulting and business process outsourcing has made 16 buys since 2010. Its acquisition strategy has been to focus on geographic expansion and strengthening its industry knowledge or technological abilities, Cognizant President Gordon Coburn told Investors Business Daily.
Until recently, most buys had been tuck-in acquisitions for $200 million or less. The exception came in November, when Cognizant closed on the $2.7 billion purchase of TriZetto, a privately held provider of health care IT software that helps payers and providers work more efficiently together. TriZetto could have wound up elsewhere, though few firms could have provided a healthier home. Only IBM (IBM), Accenture (ACN) and Infosys (INFY) enjoy larger market caps than Cognizant’s $40.9 billion in the Investors Business Daily Computer-Tech Services industry group, although Wipro (WIT)isn’t far behind. Cognizant is the only member of the industry group to earn the highest possible 99 Composite Rating.
At the time of the purchase, TriZetto software managed the health benefits of close to half the insured population of the U.S. and supported about a quarter of all U.S. care providers with more than 350 health plans. TriZetto broadened the offerings of Cognizant’s already fast-growing health-care segment, which provides health insurers, drug companies, biotech and other health-related businesses with services that address regulatory requirements, including compliance with the Affordable Care Act. At the time of the buy, Cognizant’s health-care segment served more than 200 clients and accounted for about 26% of sales.
The financial services segment is Cognizant’s biggest business, accounting for 41.8% of revenue in 2014. Its manufacturing, retail and logistics segment accounted for 20.4% of 2014 revenue. Cognizant has been on a long-running winning streak with 16 straight quarters of double-digit sales and earnings growth. In the second quarter, adjusted earnings rose 20% to 79 cents a share, ahead of views. Revenue climbed 23% to $3.09 billion, also topping forecasts. Cognizant also raised its full-year 2015 earnings and revenue estimates for the second time this year. Cognizant’s stock rose 6.4% on Aug. 5, the day it reported second-quarter results. Its stock continues to hover near its all-time closing high of 68.44.
Date: August 17, 2015