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Why Cognizant Technology Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of IT consulting company Cognizant Technology Solutions (Nasdaq: CTSH  ) climbed 12% on Monday after its quarterly results and guidance topped Wall Street expectations.

So what: Cognizant shares were crushed in early May after management cut its 2012 sales outlook, but today's second-quarter beat -- EPS of $0.82 versus the average analyst estimate of $0.80 -- coupled with upbeat earnings guidance is triggering optimism over a turnaround. The upbeat results come after close rivals Infosys (Nasdaq: INFY  ) and Wipro (NYSE: WIT  ) both issued disappointing forecasts recently, suggesting that Cognizant's low-cost strategy is helping it gain market share in the soft economy.

Now what: Management now sees full-year adjusted EPS of $3.64 -- well above the analyst consensus of $3.37 -- and reaffirmed its revenue outlook of $7.34 billion. "Clients continue to turn to Cognizant to help reinvent their business models in the face of secular industry changes, evolving demographics, and a new stack of social, mobile, analytics, and cloud technologies," said CEO Francisco D'Souza. With the stock still off about 20% from its 52-week highs, there might even be room to buy into those tailwinds.   

Interested in more info on Cognizant? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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10/21/2016 10:53 AM
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