NEW YORK (TheStreet) -- Cognizant Tech Solutions (CTSH) - Get Cognizant Technology Solutions Corporation Class A Report shares are down 3.1% to $60.20 in early market trading on Thursday after the IT company announced that its seven year master services agreement with Health Net (HNT) will not be implemented if the company merges with Centene (CNC) - Get Centene Corporation Report.

The company said that its seven year agreement, which was scheduled to being in the coming weeks, to provide end-to-end administrative services to the managed health care service provider will be deferred due to the overlaps that will occur if the merger with Centene goes through.

Separately, the company reaffirmed its full year EPS estimate between $2.93 per share and $2.96 per share on revenue between $12.24 billion and $12.33 billion.

Health Net agreed to be acquired by Centene today for about $6.3 billion in cash and stock, or $78.57 per share, a 21% premium of its previous closing price on Thursday.

Health Net shares are up 11.65% to $72.64.

TheStreet Recommends

TheStreet has further coverage of Health Net's merger here.

TheStreet Ratings team rates COGNIZANT TECH SOLUTIONS as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate COGNIZANT TECH SOLUTIONS (CTSH) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, solid stock price performance and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 22.6%. Since the same quarter one year prior, revenues rose by 20.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CTSH's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.08, which clearly demonstrates the ability to cover short-term cash needs.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 28.14% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • COGNIZANT TECH SOLUTIONS has improved earnings per share by 8.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, COGNIZANT TECH SOLUTIONS increased its bottom line by earning $2.35 versus $2.02 in the prior year. This year, the market expects an improvement in earnings ($2.95 versus $2.35).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 9.8% when compared to the same quarter one year prior, going from $348.88 million to $382.90 million.
  • You can view the full analysis from the report here: CTSH Ratings Report