On Thursday, before market open, CGI will report its fourth quarter and fiscal 2014 results. Tse, noting that this is a “seasonally soft” quarter says he expects results that are in-line with the street’s expectations. He thinks the company will generate operating EPS of $0.74 on revenue of $2.7-billion, slightly better than consensus of $0.73 on a topline of $2.6-billion.
Tse points out that CGI Group trades at a more than 10% discount to its peer group, on a P/E basis. He says this doesn’t take into account the acquisitions that have driven its share price, or the potential for another one. The analyst says he expects that CGI will make another acquisition “in the next 12 months”.
The analyst notes that CGI upcoming quarterly report comes against a soft backdrop in the IT Services sector. While he says third quarter declines were “not insignificant”, particularly in the European market, he remains bullish on the company’s longer term prospects.
“Obviously, we believe there’s some risk to CGI’s bookings as well particularly given its soft seasonal quarter”, says Tse, adding: “…this does not change our positive view on the name over the next 12 months.”
In a research update to clients this morning, Tse maintained his “Buy” rating and (C)$45.00 one-year target on CGI Group.