November 9, 2010 / 12:12 PM / 7 years ago

UPDATE 2-CGI Group says Stanley buy to boost earnings

* Q4 EPS C$0.30 vs C$0.27 year-ago

* Revenue up 9 pct at C$1.01 bln

* Says Stanley buy to add up to 20 pct to EPS

* Shares jump 8 percent (Adds analyst quotes, details, share price; in U.S. dollars unless noted)

By Alastair Sharp

TORONTO, Nov 9 (Reuters) - Shares in CGI Group (GIBa.TO) (GIB.N) surged as much as 10 percent on Tuesday after Canada's biggest technology outsourcing and consulting company posted a higher quarterly profit, helped by new contracts in the government, healthcare and financial services segments.

The fourth-quarter results were broadly in line with analyst expectations but CGI impressed the market with its forecasts for earnings growth over the next two years.

"There was a lot of concern that the quarter would be a miss," said Dushan Batrovic from Dundee Securities. "The buy side was concerned about generally soft spending in the IT services sector and more noise around the new acquisition."

CGI, which provides computer services to companies ranging from Bombardier Inc (BBDb.TO) to Cirque du Soleil, completed the $940 million purchase of U.S.-based IT services firm Stanley Inc in August -- a deal that expanded its work with U.S. government agencies in defense, cyber-security and intelligence.

CGI said the integration of Stanley, now 85 percent complete, would add 15 to 20 percent to its earnings per share after one to two years.

"CGI Federal is now able to service all U.S. government agencies, including all branches of the military ... as demonstrated by recent wins with the U.S. Marine Corps, the State Department and the Nuclear Regulatory Commission," Chief Executive Michael Roach said on an analyst call.

In the latest quarter CGI posted a net profit of C$84.1 million ($84.1 million), or 30 Canadian cents a share, on revenue of C$1.01 billion. That compared with C$82.6 million, or 27 Canadian cents a share, a year ago.

Analysts had, on average, forecast earnings of 30 Canadian cents a share on revenue of C$1.01 billion, according to Thomson Reuters I/B/E/S.

The Montreal-based company's shares, which had gained 9 percent this year prior to the earnings release, were ahead 8 percent to C$16.80 by late Tuesday morning on the Toronto Stock Exchange, after rising as high as C$17.14.

The company said its results included expenses of C$16.7 million related to the acquisition of Stanley.

Before one-time expenses, earnings from continuing operations were 34 Canadian cents a share.

In the fourth quarter, CGI's new contract signings totaled C$1.1 billion.

The company also paid C$123.4 million to buy back 8.1 million of its shares, and has reduced its share count by almost 10 percent in fiscal 2010.

$1=$1.00 Canadian Additional reporting by Ashutosh Joshi; editing by Rob Wilson

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