CGI GROUP INC. (Toronto symbol GIB.A; www.cgi.com) is Canada’s largest provider of computer outsourcing services. CGI helps its clients automate routine functions, like accounting and buying supplies. That makes them more efficient and lets them focus on their main businesses.
CGI is a long-term recommendation of our Successful Investor newsletter. We made it our #1 Canadian stock of the year in 2010 at $15. The stock has risen 107% for our subscribers since then. We also made it our stock of the year in 2011. The stock is up 73% since then.
CGI continues to profit from its August 2012 acquisition of Logica plc, a U.K.-based firm that provides computer-outsourcing services in 36 countries.
Thanks to this $2.7-billion purchase, CGI’s earnings rose 66.3% in its 2013 second quarter, which ended March 31, 2013, to $175.9 million from $105.7 million a year earlier. Due to more shares outstanding, earnings per share rose at a slower rate of 40.0%, to $0.56 from $0.40. These figures exclude unusual items, such as costs to integrate Logica.
Revenue soared 137.0%, to $2.5 billion from $1.1 billion. In addition to the contribution from Logica, CGI continues to win new contracts in the U.S. thanks to its August 2010 purchase of Stanley Inc., which sells computer-outsourcing services to government agencies. Revenue at CGI’s U.S. operations rose 17.7%.
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Tech stocks: CGI order backlog up almost $5 billion from a year earlier
CGI booked $2.2 billion of new contracts in the latest quarter. New clients accounted for 40% of this total; the remaining 60% came from extensions and renewals. CGI ended the quarter with an order backlog of $18.0 billion, up from $13.2 billion a year earlier.
The company borrowed most of the cash it needed to buy Logica. Its $3.0 billion of long-term debt is 31% of its market cap. It also holds cash of $167.7 million, or $0.54 a share.
The company should earn $2.12 a share in fiscal 2013. CGI may also start paying a dividend once it finishes integrating Logica.
In the latest edition of The Successful Investor, we look at whether CGI can keep costs down as it continues to integrate Logica. We also look at the company’s financial outlook and whether the shares will keep on rising. We conclude with our clear buy-sell-hold advice on the stock.
(Note: If you are a current subscriber to The Successful Investor, please click here to view Pat’s recommendation in the latest issue. Be sure to log in first.)
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