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.