UPDATE 4-CA ups FY outlook, boosts dividend; shares jump

Tue Jan 24, 2012 6:28pm EST

* Q3 adj EPS $0.65 vs est $0.54

* Q3 rev $1.26 bln vs est $1.21 bln

* Ups FY12 outlook for adj EPS and rev

* Hikes annual dividend

* Shares rise 18 pct after market (Adds CEO comments from conference call, analyst comments; updates shares)

By Siddharth Cavale

Jan 24 (Reuters) - Business software maker CA Inc posted quarterly results above Wall Street estimates on stronger subscription revenue, raised its full-year outlook and boosted its annual dividend, sending its shares up 18 percent in extended trading.

"The numbers were solid (in the quarter) but the bigger surprise was the timing and the magnitude of the dividend increase," Kirk Materne, analyst with Evercore Partners, told Reuters.

CA announced plans to return about 80 percent of its free cash flow to shareholders through fiscal 2014 by raising its annual dividend five folds to $1.00 per share. It also said it would repurchase up to $1.5 billion of common stock.

"(The dividend increase) just opens up a new potential investor base for CA...and the new dividend yield is going to create new floor for the shares," Materne said.

The company also said it continues to expect over three years an acceleration to mid-single digit constant currency organic revenue growth and non-GAAP operating margin expansion of 100 basis points annually.

"Our expectation is that over time much of this operating margin expansion will come from improvements in execution and our enterprise solution segment," William McCracken, CA's chief executive, said on a conference call.

McCracken also said the company could make acquisitions outside North America.

During the third quarter, enterprise solutions revenue rose 11 percent in constant currency to $478 million.

CA has anticipated in its strategic plans acquisition activities in the range of $300 million to $500 million per year on average through fiscal 2014.

"They are likely to remain focused on areas like Cloud and virtualization, it's likely they will increase their stand there (for acquisitions)," Oppenheimer analyst Shaul Eyal told Reuters.

The company, which makes software to manage large computer networks, raised its outlook for fiscal 2012. It now sees adjusted earnings of $2.21 to $2.25 per share, on revenue growth of 6 percent..

Third-quarter earnings rose to $206 million, or 54 cents a share, from $200 million, or 39 cents a share, a year ago. Revenue of $1.26 billion beat average analyst estimates on subscription revenue growth of 4 percent boosted by a single license payment, which contributed 3 percentage points to revenue growth.

CA shares rose to $26.60 in extended trading on Tuesday. They closed at $22.82 on the Nasdaq. (Reporting by Siddharth Cavale in Bangalore; Editing by Gopakumar Warrier)

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