Why CGI Group 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 Canadian IT services specialist CGI Group (NYSE: GIB  ) climbed 15% today after its quarterly earnings and outlook topped Wall Street expectations. 

So what: CGI's second-quarter revenue of C$2.53 billion fell a bit short of estimates, but a clear beat on the bottom line -- adjusted EPS of C$0.56 versus the consensus of C$0.50 -- suggests that the company's restructuring initiatives continue to gain traction. Specifically, management seems to be integrating its recent European acquisition, Logica, much more smoothly than expected, prompting analysts to raise their valuation estimates yet again.

Now what: Management now sees post-integration savings from Logica of $375 million U.S., up from its previous estimate of $300 million U.S. "[W]e are seeing the business benefits of implementing our operating model as we trend to the upper end of our fiscal 2013 EPS accretion commitment of 25 to 30 percent before integration costs," said CEO Michael Roach. "We continue to identify and action opportunities to bring incremental value to our stakeholders." More important, with the stock still trading at a forward P/E of about 12, there might be room left to gain from those opportunities. 

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