SocGen expects IT services cos' profits to fall this year

Earnings at global software and IT services companies are expected to decline by 2% 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%, compared to its prior view of a 12% 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% since the start of June.