UPDATE 1-SocGen expects IT services cos' profits to fall this year

Fri Jul 20, 2012 4:53am EDT

* Lowers earnings estimates for global software, IT
companies
    * Expects IT cos' earnings to fall 2 pct in 2012, increase 4
pct in 2013
    * Favours large caps vendors and companies that are
restructuring


    July 20 (Reuters) - Earnings at global software and IT
services companies are expected to decline by 2 percent on an
average this year, Societe Generale said, downgrading several
stocks, including Logica Plc and Sage Group Plc.
    "We expect companies to adopt a more cautious view of their
prospects in the upcoming reporting season, and consensus
estimates are likely to come down," the brokerage said.
    SocGen had earlier projected flat earnings for the sector
this year.
    For 2013, SocGen expects earnings to grow only 4 percent,
compared to its prior view of a 12 percent growth.
    The brokerage cut its rating on British companies Logica and
Sage Group to "sell" from "hold." It downgraded Canada's top IT
services company CGI Group Inc and French company
Aubay SA to "hold" from "buy."
    SocGen also cut its price targets on several stocks,
including SAP AG, Software AG, Oracle Corp
, IBM Corp and Infosys Ltd. 
  
    The brokerage said it favours vendors with a strong product
pipeline and greater exposure to the United States and emerging
markets. It also prefers large-cap vendors as they are more
diversified.
    SocGen named Atos SA, SAP AG, Altran
Technologies SA and CapGemini SA among its
top picks. It upgraded Alten SA to "buy" from "hold,"
partly on valuation.
    The STOXX 600 Technology Index has risen 8.2 percent
since the start of June.           
    
 Company name       RIC          Price Target      Close Price  
                                 New     Old       (July 19)
 Accenture                       $58     $64       $58.3    
 Alten                           eur29   eur 25    eur21.6
 Altran Tech                     eur5.2  eur5.6    eur3.44 
 Atos                            eur59   eur60     eur46.7
 Aubay                           eur5.4  eur6.3    eur4.85 
 Axway Software                  eur20   eur23     eur13.9 
 CapGemini                       eur34   eur40     eur26.2
 CGI Group                       C$24    C$26      C$23.7
 Dassault Systemes               eur77   eur80     eur73.4
 IBM                             $188    $205      $183.7
 Infosys                         $38     $45       $39.2
 Indra                           eur8.5  eur10.5   eur6.43 
 Logica                          71p     79p       104.6p
 Oracle                          $30     $30.5     $22.9 
 Sage Group                      260p    270p      276p
 SAP                             eur56   eur60     eur49.1 
 Software AG                     eur32   eur34     eur23.1
 Sopra Group                     eur49   eur57     eur34.8
 Steria                          eur17   eur21     eur11.6