CA Inc., the business-technology services provider in talks with an activist investor, surged the most in more than three years after reporting earnings that beat analysts’ estimates and increasing dividends and share buybacks.
The shares gained 9.7 percent to $25.03 at the close in New York, the biggest jump since October 2008. The stock was the second best performer in the Standard & Poor’s 500 Index.
The Islandia, New York-based company said income from continuing operations rose 34 percent after sales grew in its services and enterprise software units. CA, targeted by Taconic Capital Advisors LP after the hedge fund acquired a 5.1 percent stake this month aiming to boost returns, said it will increase its annual dividend to $1 from 20 cents.
CA plans to return $2.5 billion to shareholders by March 31, 2014, by increasing the annual payout and repurchasing $1.5 billion of stock, including about $230 million remaining under its existing authorization.
“We are not done,” Chief Executive Officer Bill McCracken said. “We remain focused on continuing to execute on our strategy and making further operational enhancements including driving new product sales and increasing sales productivity.”
Income from continuing operations rose to $263 million, or 54 cents a share, from $196 million, or 38 cents, a year earlier, the company said yesterday in a statement. Excluding some items, profit was 65 cents, beating the 54-cent average estimate of analysts surveyed by Bloomberg.
Revenue rose 10 percent to $1.26 billion, exceeding analysts’ $1.21 billion estimate.
For the fiscal year ending March 31, CA said sales will rise 6 percent, the high end of its prior range. The company raised its forecast for adjusted earnings to $2.21 to $2.25 from $2.13 to $2.18.
Mainframe solution sales rose 9 percent. Enterprise software climbed 12 percent, and services gained 17 percent.
Taconic Capital said Jan. 11 it was in talks with management to boost returns after acquiring a stake in CA. Taconic said the company could pay out more cash to shareholders, implement a more efficient capital structure and increase profitability in its enterprise solutions division.
Taconic was co-founded by Kenneth Brody and Frank Brosens and has offices in New York and London.
The company told analysts in July it expected to use up to 50 percent of free cash flow for share buybacks, Bill Hughes, a CA spokesman, said in an e-mailed statement yesterday. In October, executives said they were evaluating balance sheet options, and would announce a plan in the fiscal fourth quarter, which began this month, Hughes said.
The company was formerly known as Computer Associates Inc.