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Why CGI Group Shares Jumped

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 Canadian IT services specialist CGI Group (TSX: GIB.A,NYSE:GIB) popped 10% today after its quarterly results easily topped Bay Street expectations.

So what: CGI has rallied nicely in 2013 on positive signs regarding its recent Logica acquisition, and today’s second-quarter results — adjusted EPS of $0.63, versus the consensus of $0.58, on revenue that more than doubled — only reinforce that optimism. While much of the talk so far has focused on the deal’s cost-saving qualities, today’s results suggest that Logica’s reach in markets like Sweden, Finland, Spain, and Brazil is starting to drive some solid top-line synergies.

Now what: CGI’s backlog of signed orders stood at $18.7 billion at the end of June, up $5.1 billion from the year-ago period and up $728 million sequentially. “As we approach the first anniversary of our Logica merger, I am very pleased with the continued strengthening of our business performance and the ongoing progress we are making with respect to implementing our integration plan,” said CEO Michael Roach in a statement. More important, with the stock still trading at a price-to-sales discount to much larger rivals Accenture and IBM, there might be some room left to buy into that progress.

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Fool contributor Brian Pacampara does not own shares in any companies mentioned at this time.  The Motley Fool does not own shares of any companies mentioned at this time.       

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