CIBC Capital Markets retained its outperformer rating on the shares of Calian Group (CGY.TO) and raised its price target to C$90.00 from C$76.00 after the company reported its fiscal second-quarter results.
"Calian was up ~20% today following an FQ2 beat, with revenue 6% above the Street and adj. EBITDA 26% above," said CIBC in the May 14 note.
CIBC raised its full-year estimates to reflect the increased 2026 guidance, though it expects a portion of the FQ2 strength was pulled forward from H2.
CIBC now expects 13% F2026 revenue growth (vs. 10% prior) and 19% adj. EBITDA growth (16% prior).
With FQ2 bookings up 29% Y/Y and organic growth accelerating to 12% from 6% in FQ1, CIBC continues to see Calian as "well positioned" to benefit from defense-spending tailwinds.
Canada's focus on defense spending continued to be a tailwind in the quarter, with the government focused on hitting its 2% of GDP target before its March 31 fiscal year end, noted CIBC.
"Additionally, Calian is seeing good growth in Europe and is investing further for growth," noted CIBC. "Calian is focused on leveraging long-term customer relationships and bidding on larger opportunities as a prime vendor to drive growth."
CIBC expects the FQ2 beat was helped by better-than-expected growth in IT & Cyber in what is a "seasonally strong quarter", as well as defence spending ahead of the government's fiscal year end. CIBC expects some pull forward from H2 contributed to the beat, but view the raised full-year guide as a net positive.
CIBC is forecasting slower adj. EBITDA growth in H2 vs. a strong H1 as Calian ramps up investments in Europe to continue to capitalize on defence spending tailwinds in the region.
CIBC noted, Calian's capital allocation priority remains M&A, with a robust pipeline and multiple discussions underway. It expects Calian to focus on adding capabilities and expanding in Europe.
Calian paid out dividends equal to 17% of its operating FCF in H1, below its 20%-25% target, and management noted it will review its dividend level, said CIBC and added that the company will also now execute on share repurchases opportunistically after pausing share repurchases in FQ2.
"We see Calian as attractively valued at 9x FY2 EBITDA vs. Aerospace & Defence peers at 13x," added CIBC. "We retain our Outperformer rating and raise our price target to $90 (prior $76) as we increase our target multiple on the Defence & Space business to 12x (prior 10x)."
Price: $79.84, Change: $-2.40, Percent Change: -2.92%