"CGI Group, Alphabet, and Cascades: Analyst Recommendations and Stock Prices Analysis"

2023-04-26 16:42:11

(Photo: The Canadian Press)

What to do with CGI Group, Alphabet and Cascades titles? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed.

CGI Group (GIB.A, $135.48): growth and margins exceed Desjardins’ expectations

CGI Group surpasses the forecasts of Jérome Dubreuil of Desjardins Capital Markets across the board in the second quarter, a performance that sanctions the 42% appreciation of the stock since June 2022.

Revenue of $3.7 billion compares to the consensus of $3.56 billion, or growth of 11.4% in constant currencies, and 9.5%, without the effect of acquisitions.

This performance far exceeds the forecast increase of 6.5% by the analyst who seems pleasantly surprised given the uncertain economic situation.

Earnings before interest and taxes of $601 million (up 13.2%) and margins of 16.2% also beat consensus of $573 million and 16.1%, respectively. This margin compares to that of 16.1% in the first quarter and 16%, a year ago, underlines the analyst.

Earnings of $1.82 per share (up 19%) are also higher than the consensus of $1.72.

Jérome Dubreuil is positive about CGI’s ability to maintain its margins. The strong results so far validate CGI’s argument that its growth has little to do with the moderation of the biggest cloud computing providers (“hyperscalers”), he adds, in a our preliminary.

The new contracts signed worth $3.8 billion and the ratio of 103.3%, which compares these new contracts to the revenues already invoiced, are “acceptable”. This ratio has also improved from 100% a year ago.

Lastly, the $25.2 billion backlog represents 1.8 times annual revenue.

The only downside is that the cash flow generated of $469 million is below the consensus of $503 million. The 0.7% decline is attributable to the addition to working capital.

Jérome Dubreuil does not take offense since CGI has significant financial resources at its disposal and benefits from a very solid balance sheet.

Moreover, the company repurchased $400 million of its own shares during the quarter.

Before the morning conference call, the analyst did not touch his buy recommendation or his target price of $140.