Why Cognizant Technology Shares Got Crushed

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 services specialist Cognizant Technology Solutions (NAS: CTSH) plummeted 19% on Monday after the company's full-year guidance disappointed Wall Street.

So what: Cognizant's first-quarter results managed to top estimates, but a big cut to its second-quarter and full-year outlook confirms previous concerns over a slowdown in the space. Last month, Indian counterparts Wipro and Infosys also issued disappointing guidance, suggesting that the shaky global economy continues to weigh heavily on IT spending.

Now what: For the full year, management now sees adjusted EPS of $3.62 on revenue of at least $7.34 billion, down from its prior view of $3.69 and $7.5 billion, respectively. "Due to a slower-than-anticipated acceleration in demand as we entered the second quarter," cautioned CEO Francisco D'Souza, "we are adopting a more conservative stance for the remainder of the year and revising our guidance to at least 20% revenue growth for 2012." With the stock flirting with its 52-week lows and trading at a reasonable forward P/E, however, much of that bleakness might now be baked into the price.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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