4 Buy-Rated Information Technology Services Stocks to Add to Your Portfolio

With the advent of big data technology and large-volume-data generation, businesses and enterprises have become increasingly dependent on the IT services industry to optimize their business processes. Moreover, because the COVID-19 pandemic has accelerated digital transformation, enterprises are increasing their IT spending significantly. According to the latest Gartner Worldwide IT spending forecast report, global IT spending is projected to total $4.4 trillion in 2022, rising 5.3% from 2021.

The global IT services market is expected to reach $1.12 trillion by 2026, registering an 8% CAGR. Furthermore, the growing popularity of cloud-based services and the necessity of automating  business processes are expected to propel the demand for services offered by IT services companies.

Therefore, we think it could be wise to bet on quality IT services stocks International Business Machines Corporation (IBM), Infosys Limited (INFY), Cognizant Technology Solutions Corporation (CTSH), and CDW Corporation (CDW). They are expected to deliver substantial returns in the near term based on their consistent innovations, diverse product portfolios, and strong sales growth.

Click here to check out our Cloud Computing Industry Report for 2021

International Business Machines Corporation (IBM)

IBM is a multinational information technology corporation that offers cloud computing, artificial intelligence, data analytics, Internet of Things (IoT), IT infrastructure, digital workspace, and cybersecurity. The Armonk, N.Y., company also provides hosting and consulting services in areas ranging from mainframe computers to nanotechnology. It operates in more than  171 countries.

This month, IBM launched its first IBM Cloud Multizone Region (MZR) in Spain, and partnered with a financial group in Spain, CaixaBank, to enhance its digital capabilities. IBM’s MZR will be able to scale hybrid cloud adoption to enable European clients to deploy critical workloads with a high level of security. This new introduction should help IBM increase its footprint to help foster business growth in Europe.

IBM’s total revenue for the second quarter, ended June 30, 2021, increased 3.4% year-over-year to $18.75 billion. The company’s gross profit grew 3.5% from the year-ago value to $9 billion. Also, its revenue under cloud and cognitive software rose 6.1% from the prior-year quarter to $6.1 billion. The company’s net income came in at $1.33 billion during this period.

Analysts expect IBM’s revenue to increase 2% year-over-year to $75.13 billion in its  fiscal year 2021. Also, the company has an impressive earnings surprising history; it surpassed the consensus EPS estimates in three of the trailing four quarters. In addition, its EPS is expected to increase 23.8% in the current year. The stock has gained 6.7% in price over the past nine months and 9.4% over the past year.

IBM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

The  stock has an A grade for Momentum, and a B for Value and Quality. We’ve also graded IBM for Sentiment, Stability, and Growth. Click here to access all of IBM’s ratings. IBM is ranked #7 of 46 stocks in the A-rated Technology – Hardware industry.

Infosys Limited (INFY)

Headquartered in Bengaluru, India, INFY provides global next-generation digital services, consulting, information technology, and outsourcing services. The company also offers application development and management, product engineering, infrastructure management, enterprise application management. In addition, it has established 13 subsidiaries around the globe.

This month, INFY collaborated with Frost Bank to offer human-centric, digitally approached mortgage loans to deliver a superior borrower experience and innovative operational efficiency. This collaboration will help INFY to build strong capabilities while meeting its clients’ expectations with unique solutions.

For its fiscal  first quarter, ended June 30, 2021, INFY’s revenues increased 21.2% year-over-year to $3.78 billion. The company’s gross profit grew 21.2% from its  year-ago value to $1.27 billion. Its operating profit rose 26.6% from the prior-year quarter to $896 million. Also, the company’s EPS increased 30.8% year-over-year to $0.17.

INFY’s revenue is expected to increase 16.4% year-over-year to $15.79 billion in its  fiscal year 2022. In addition, the company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also,  its EPS is expected to increase by 13.1% in the current year. Over the past nine months, the stock has soared 40.3% in price, and has returned 68.6% over the past year.

INFY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Quality, Stability, and Momentum.

In addition to the POWR Rating grades I’ve just highlighted, one can see INFY’s ratings for Value, Sentiment, and Growth here. INFY is ranked #5 of 12 stocks in the A-rated Outsourcing – Tech Services industry.

Cognizant Technology Solutions Corporation (CTSH)

CTSH is an intelligent software company plugged into the Internet of Things (IoT), fueled by AI and running natively on the cloud. Headquartered in Teaneck, N.J., CTSH operates in three segments: Digital Business; Digital Operations; and Digital Systems & Technology. CTSH provides business intelligence, data warehousing, customer relationship management, supply chain management, enterprise resource planning, and many other solutions.

Last month, CTSH acquired digital engineering assets from a digital engineering and project management agency, Hunter Technical Resources. The acquisition should help CTSH expand its talent network in key markets and strengthen its digital engineering resources in the U.S.

CTSH’s revenue increased 14.6% year-over-year to $4.59 billion. The company’s income from operations grew 49% from the year-ago value to $696 million. Its net income rose 41.8% from the prior-year quarter to $512 million. And its EPS increased 44.8% year-over-year to $0.97.

For its fiscal year 2021, analysts expect CTSH’s revenue to increase 10.8% year-over-year to $18.45 billion. It has surpassed the consensus EPS estimates in three of the trailing four quarters. The company’s EPS is estimated to increase 18.1% in the current year. The stock has gained 9.9% in price over the past three months and 9% over the past year.

It’s no surprise that CTSH has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Momentum, and a B for Quality.

Click here to see the additional POWR Ratings for CTSH (Growth, Value, Stability, and Sentiment). In the Outsourcing – Tech Services industry, CTSH is ranked #3.

CDW Corporation (CDW)

Incorporated in 1984, CDW in Vernon Hills, Ill., is a provider of information technology solutions to business, government, education, and health care customers in the U.S, the U.K., and Canada. The company’s products and services range from hardware and software to integrated IT solutions, such as security, cloud, hybrid infrastructure, and digital experience.

Last month, CDW acquired a provider of cybersecurity services, Focal Point Data Risk. Through this acquisition, CDW will be able to help its customers to protect their most critical data. Christine A. Leahy, CDW’s president and chief executive officer, stated, "Adding Focal Point’s array of security consulting, customer workforce skills development, and professional services capabilities expands CDW’s services portfolio and enhances our ability to address risks posed by malicious cyber threats and cyber workforce shortages, while helping customers successfully navigate shifting data protection laws."

For the second quarter, ended June 30, 2021, CDW’s net sales increased 17.9% year-over-year to $5.15 billion. The company’s gross profit grew 18.2% from its year-ago value to $882.8 million. Its operating income rose 30.5% from the prior-year quarter to $369.9 million, and the  company’s net income increased 44.9% year-over-year to $274.1 million.

Analysts expect CDW’s revenue to increase 10.6% year-over-year to $20.43 billion in its  fiscal year 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. CDW’s EPS is expected to increase by 17.1% in the current year. Furthermore,  the stock has gained 39.8% in price over the past nine months and 66.5% over the past year.

CDW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has a B grade for Sentiment, Growth, and Quality. We’ve also graded CDW for Momentum, Stability, and Value. Click here to access all CDW’s ratings. In the Technology – Services industry, CDW is ranked #14 of 73 stocks.

Click here to checkout our Cybersecurity Industry Report for 2021

IBM shares rose $0.61 (+0.45%) in premarket trading Tuesday. Year-to-date, IBM has gained 11.17%, versus a 17.67% rise in the benchmark S&P 500 index during the same period.

Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.

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