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CGI Keeps Outperform Rating, C$150 Target at National Bank, Citing "Compelling Value", In-Line Q2 Results and "Light(er) Booking"
The Toronto Stock Exchange is down near 230 points at midday, with most sectors lower, led by info tech (-2.0%) and industrials (-1.8%).Energy (+1.9%) is the top performer, boosted by higher oil prices.The Bank of Canada held its key benchmark interest rate steady at 2.25%. Avery Shenfeld, chief economist at CIBC Capital Markets, said the decision to leave the policy rate at 2.25% came as no surprise given the clouded outlook ahead.Shenfeld noted the Bank assumed that oil prices will gradually decline to US$75/bbl in mid-2027, "still lifting near term inflation but leaving the growth outlook little changed from the prior forecast, one that only makes very gradual progress in eliminating economic slack". While the BoC sees "little evidence" of a spillover to core inflation so far,", it said that it will not let "higher energy prices become persistent inflation".Shenfield said, "If that sounds hawkish, its worth noting that the Bank doesn't see that happening, projecting a spike to 3% inflation but a return to the 2% target early next year, a view we share, and while it says it might need to adjust the policy rate, those changes "can be expected to be small."In stocks, CGI (GIB-A.TO) is down near 14% after it reported its second-quarter results this morning.CN Rail (CNR.TO) is 6.1% lower after reporting inline first-quarter results.
CGI (GIB-A.TO, GIB) was down more than 2% in US premarket trade Wednesday after it reported in line adjusted earnings but lower than expected revenues for the second quarter, said the company on Wednesday.For the second quarter of Fiscal 2026, the company's net earnings were C$444.7 million, compared to $429.7 million in the corresponding year-ago quarter. Diluted earnings per share for the quarter were $2.09 compared to $1.89 in the same period last year.Second-quarter adjusted net earnings were $483.4 million, compared with $480.7 million in the same period last year. Adjusted diluted earnings per share for the quarter was $2.27, compared to $2.12 for the same period last year. The consensus estimates compiled by FactSet for Non GAAP EPS was $2.27 per share.The company's second-quarter revenue was near $4.16 billion, compared to $4.02 billion in the year-ago quarter. The consensus estimates compiled by FactSet for sales was near $4.24 billion.As of March 31, 2026, the company's backlog reached $31.50 billion, representing 1.9 times annual revenue, said the company. Cash provided by operating activities of $451.1 million, represented 10.9% of revenue and $2.47 billion or 15.1% of revenue on a trailing 12 month basis while bookings were $4.31 billion, for a book-to-bill ratio of 103.8% or 108.4% on a trailing 12 month basis, it added.On April 28, 2026, the company's unsecured committed revolving credit facility was increased to $2.50 billion and is now comprised of a three-year tranche of $1.00 billion which matures in 2029 and a five-year tranche of $1.50 billion which matures in 2031, said the company and added that both tranches can be further extended.On April 28, 2026, CGI's board of directors approved a quarterly cash dividend of $0.17 per share, unchanged from the prior quarter. This dividend is payable to holders of Class A subordinate voting shares and Class B shares (multiple voting) on June 19, 2026, to shareholders of record as of the close of business on May 15, 2026, added the company."CGI delivered a strong first half of the fiscal year, with industry-leading EPS accretion and cash generation," said Francois Boulanger, President and Chief Executive Officer. "Even in the context of today's dynamic business environment, this performance reflects the resilience of our business model, the relationships with our clients, and the outstanding expertise of our global team. As clients continue to invest in AI, they need a trusted partner to address mission-critical environments, modernize complex legacy estates, and deliver measurable outcomes. CGI's AI-first strategy-focused on making AI real and outcome-driven-positions us well to help clients across every industry and geography."
Stifel Canada cut its price target on the shares of CGI (GIB-A.TO) to $128.00 from $160.00 on "incremental sector-wide compression," ahead of the company reporting its second-quarter earnings pre-market on Wednesday.Analyst Suthan Sukumar, who is maintaining a buy rating on the stock, says an elevated cost takeout environment should bode well for continued demand strength in managed services, while also helping clients free up capital for broader AI investment, benefiting end-to-end providers like CGI.While macro uncertainty remains the key factor given the conflict and tariff impacted end-markets, recent industry results suggest more stability in the backdrop, bolstered by enduring strength in financial services and government, he adds."All in, we expect a solid print to reaffirm durability and a stronger growth trajectory over the year, vs. the market's sustaining AI disruption fears. At a decade plus low valuation at 10x P/E, risk-reward looks appealing, particularly with more M&A upside potential ahead."Price: $100.41, Change: $+0.23, Percent Change: +0.23%
Independent IT and business consulting services firm CGI (GIB-A.TO) is launching a high-security sovereign AI and data services platform in Finland, the company said on Monday.The service offers a deployment model delivered from a Finland-based data center, and provides a KATAKRI-compliant (Finland's national security auditing criteria) environment for organizations to develop and operate AI applications, Monday's statement noted."Generative AI offers significant potential for innovation and efficiency, and organizations are currently evaluating different ways to integrate AI into their overall architecture. CGI's high-security AI platform provides a trusted alternative to public cloud and hybrid solutions, enabling clients to adopt AI quickly and securely while maintaining strong control over their data and environment, said CGI Finland's Jenni Mikkola, senior vice president and leader for global technology operations.CGI shares closed down $0.70, to $99.34 on Friday on the Toronto Stock Exchange.
RBC Capital Markets provided a first-quarter earnings preview for stocks in its Canadian Technology coverage universe on Friday.The S&P/TSX Info-Tech sub-sector had its "worst start to the year" since 2022, due to the continued downward re-rating of software stocks on concerns regarding AI disruption, noted RBC.While RBC expects Q1 results to be "largely in line" with consensus and believes the "magnitude of the pullback in software valuations is an overreaction," it believes sentiment is unlikely to materially change in the short term.Even though RBC anticipates "slightly improved organic growth" for the average stock in its coverage this quarter, the market appears "risk-averse and may largely ignore positive surprises and disproportionately penalize negative surprises," in light of the market sensitivity regarding AI disruption and uncertainty regarding the macro environment, said RBC.Among its covered stocks, RBC believes the "best-positioned stocks" for calendar Q1 results are Celestica (CLS.TO), Shopify (SHOP.TO), Constellation Software (CSU.TO), and Kinaxis (KXS.TO).RBC believes Celestica will report Q1 earnings above consensus and increase FY26 guidance, given hyperscaler capex continues to increase, along with strong network switch and AI server demand, against Celestica's historically conservative outlook, added RBC."Given the strong 36% YTD rally in Celestica's shares, Q1 results may not be a catalyst for the stock," said RBC. "Even so, we believe Celestica's strong growth momentum, ongoing margin expansion, and mix shift to more structurally attractive segments of the market are likely to help sustain Celestica's valuation to remain above peers and toward the high end of its historical range."For Shopify, RBC expects "solid" Q1 results and Q2 guidance slightly above consensus estimates.U.S. e-commerce spending strengthened through Q1, noted RBC which it believes implies revenue growth accelerates sequentially, with Q1 revenue and adj. EPS likely slightly above consensus."While the valuation of Shopify's shares has re-rated down with the YTD pullback in software stocks, Shopify's fundamentals remain solid, in our view, and we expect strong growth to drive shareholder returns over the long term," said RBC.RBC expects Constellation's shares to modestly rally following Q1 results."With the stock trading near multi-year valuation lows, we see investor sentiment improving, given Q1 slightly ahead of consensus, TTM free cashflow up 25%, and annualized Q1 capital deployed on acquisitions likely tracking to a new record," said RBC. "We see Constellation's valuation as compelling, compared to our forecast for a 17% adj. EBITDA CAGR over the next 3 years."RBC believes Kinaxis's shares may "slightly rally" following Q1 results. It expects Kinaxis to report "solid" Q1 results, slightly above consensus, with continued growth re-acceleration and likely healthy bookings."With Kinaxis seeing reaccelerating growth, but trading at discounted valuation levels, we see compelling risk-reward on the shares," added RBC. "Moreover, ramping share buybacks may provide a floor for the stock."Price: $565.60, Change: $+28.12, Percent Change: +5.23%
CGI (GIB-A.TO) implemented a multi-agent AI solution built on AWS Bedrock for SOK Finance to bring AI into production use in financial administration and customer service, the company said on Thursday.The solution "significantly accelerates" processes such as invoice copy requests and due date changes, "improving efficiency and consistency" compared with previous manual handling, said the company.The solution was deployed in SOK Finance's Palveluassa service center, which provides financial management and payroll services for the S Group, a customer-owned Finnish network of retail and service companies with approximately 2,000 outlets, the company added.The company was responsible for the design, implementation and deployment of the solution, as well as its integration with SOK Finance's key systems, added CGI.
Independent IT and business consulting services firm CGI (GIB-A.TO and NYSE: GIB) and SSAB, a Nordic and U.S.-based steel company, said Wednesday they have agreed to expand their strategic IT partnership. As part of the agreement, CGI will deliver business-critical IT services supporting SSAB's operations in Finland and Sweden. No financial details were given.
Independent technology and professional services firm CGI (GIB-A.TO, GIB) announced Tuesday a strategic expansion of its global partnership with OpenAI, focused on Codex, and designed to "empower enterprises".According to a statement, the program will "accelerate human potential". As part of the agreement, CGI joins a select group of partners with early access to OpenAI's latest capabilities.Shares of the company were last seen up 1.6% at $106.76 on the Toronto Stock Exchange.Price: $106.76, Change: $+1.69, Percent Change: +1.61%
CIBC Capital Markets lowered its price target on eight software and services stocks ahead of Q1 results for the sector."We expect high single-digit growth in revenue and EBITDA within our coverage in Q1, despite AI-disruption concerns that have reduced the market cap of our Software coverage by an average of 24% year to date," analyst Stephanie Price said in a note to clients."With limited AI-related read-throughs from near-term earnings, investors have been reducing multiples and rethinking terminal values," Price said."For Q1, we are roughly in line with consensus expectations," the analyst said. "We expect a volatile earnings season and a focus on AI narrative for companies that meet or beat consensus expectations.""We expect that earnings misses could result in outsized market reactions," Price said. "That said, with an average 8% consensus EBITDA growth expectation for the quarter, we also see the possibility of upside from multi-year valuation lows."Price made the following changes:CGI Inc. (GIB-A.TO) to $112 from $132 (Neutral)Computer Modelling Group Ltd. (CMG.TO) to $5 from $5.50 (Neutral)Constellation Software Inc. (CSU.TO) to $4080 from $4610 (Outperformer)Descartes Systems Group Inc. (DSG.TO, DSGX) to US$116 from US$126 (Outperformer)Docebo Inc. (DCBO.TO, DCBO) to US$28 from US$34 (Outperformer)Kinaxis Inc. (KXS.TO) to $171 from $203 (Outperformer)Open Text Corp. (OTEX.TO, OTEX) to US$27 from US$32 (Neutral)Thomson Reuters Corp. (TRI.TO, TRI) to US$124 from US$140 (Outperformer)(covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www..com/contact-us)
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