(Reuters) – Information technology services provider Cognizant Technology Solutions Corp lowered its forecast for the full year for the first time in nearly four years, citing weak demand from financial services clients in North America.
Shares of the company fell as much as 20 percent – their sharpest fall in about four-and-a-half years – to an eight-month low of $56.01. The stock – among the top percentage losers on the exchange – was later trading down 17 percent at $58.15.
By 1110 ET, Cognizant had lost $3.65 billion of its market value in heavy trading.
“The rate of acceleration is not as strong as we would have anticipated and that’s particularly true in financial services and the pharmaceutical industry,” President Gordon Coburn told Reuters.
The banking sector – which brings in a quarter of Cognizant’s revenue – was flat in the first quarter for the company, hurt by softness among top North American clients.
“In North America … the incredible volatility many of our (banking) clients are seeing right now is causing them to pause,” CEO Francisco D’Souza said on a conference call.
The company counts J.P. Morgan Chase & Co, Rabobank and UBS AG among its core banking clients.
Cognizant said it expects its banking and pharmaceutical sectors to remain sluggish for the rest of the year.
The company lowered its adjusted earnings outlook for 2012 to $3.62 per share on revenue of at least $7.34 billion – down from its previous forecast of $3.69 per share in adjusted earnings on revenue of $7.53 billion.
The lowering of outlook was not shocking as its previous forecast implied aggressive sequential growth rates, J.P. Morgan Securities analyst Tien-tsin Huang wrote in a note.
Last month, Cognizant’s Indian rivals Wipro Ltd (WIPR.NS) (WIT.N) and Infosys Ltd (INFY.NS) forecast muted revenue growth. But India’s top software services exporter, Tata Consultancy Services Ltd (TCS.NS), said it expects to outperform the sector outlook.
In January, market research firm Gartner cut its forecast for worldwide IT spending growth this year to 3.7 percent from the 4.6 percent it estimated earlier.
Cognizant recorded 11 percent growth from Europe for the first quarter, better than its earlier forecast. But the company is still not bullish on the region.
Net income for the first quarter rose to $243.6 million, or 79 cents per share, from $208.3 million, or 67 cents per share, a year ago.