Cognizant shares jump on deal for new board members

Facing pressure from an activist investor, Cognizant Technology Solutions agreed to appoint three new independent directors to the board and launch an aggressive effort to return cash to investors.

As part of an agreement with activist investor Elliott Management, Cognizant said Wednesday that two of the directors will be named prior to the 2017 shareholders meeting and the other will be named closer to next year's meeting. Cognizant said three existing board members will not be up for re-election.

Cognizant, which also announced better-than-expected earnings for the fourth quarter, said it will ramp up its shift to digital and seek out more acquisitions.

The information technology consulting and outsourcing firm said a quarterly dividend payment to shareholders will begin this year and along with an aggressive share repurchase program, will return an estimated $3.4 billion to investors over the next two years.

The company is currently sitting on more than $2 billion in cash and said it plans to return about 75 percent of its U.S. cash flow to shareholders on an ongoing basis.

Cognizant shares rose almost 4 percent in morning trading, to $55.93, regaining nearly all they had lost since the beginning of the year.

The company reported fourth-quarter net income of $416 million, compared with $424 million for the same period last year.

On a per-share basis, the Teaneck, New Jersey-based company said it had net income of 68 cents. Earnings, adjusted for stock option expense and non-recurring costs, were 87 cents per share.

The results surpassed Wall Street expectations. The average estimate of 13 analysts surveyed by Zacks Investment Research was for earnings of 86 cents per share.

The company posted revenue of $3.46 billion in the period, which did not meet Street forecasts, but was better than the $3.23 billion posted in the fourth quarter of 2015. Ten analysts surveyed by Zacks expected $3.49 billion.

For the year, the company reported profit of $1.55 billion, or $2.55 per share, compared with $1.62 billion, or $2.65 per share in 2015. Revenue was reported as $13.49 billion, up 8.6 percent on 2015's $12.42 billion.

For the current quarter ending in April, Cognizant expects its per-share earnings to be 83 cents.

The company said it expects revenue in the range of $3.51 billion to $3.55 billion for the fiscal first quarter. Analysts surveyed by Zacks had expected revenue of $3.51 billion.

Cognizant expects full-year earnings to be $3.63 per share, with revenue ranging from $14.56 billion to $14.84 billion.


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