RBC raises price target on CGI Group to $115.00

RBC Dominion Securities analyst Paul Treiber raised his target for CGI (CGI Stock Quote, Chart, News, Analysts, Financials TSX:GIB.A) to $115.00 from $100.00 following its fourth-quarter results, saying organic revenue growth should improve over the next several quarters despite continued uncertainty surrounding artificial intelligence.

On Nov. 12, Treiber maintained his “Sector Perform” rating on the Montreal-based information technology consulting company, which reported results largely in line with expectations on Nov. 11.

“CGI’s shares fell 1.4 per cent [Wednesday] (vs. S&P/TSX up 0.7 per cent) after largely in line results, likely given increased investor expectations for a rebound in organic growth,” Treiber noted. “Even so, given easier year-over-year comps and TTM [trailing 12-month] bookings, CGI’s organic growth trajectory remains likely to improve over the next several quarters.”

CGI reported fourth-quarter revenue of $4.15-billion, up 3.3% year-over-year, or 2.5% in constant currency. Net earnings increased 20.8% to $460.7-million, while diluted earnings per share rose 30.2% to $2.24. Adjusted earnings per share increased 8.5% to $2.31. Quarterly bookings reached $4.53-billion, representing 109.2% of revenue, indicating that new business exceeded revenue recognized during the period.

CEO Tim Hurlebaus said demand for AI-enabled managed services contributed to the results, with those services recording a quarterly book-to-bill ratio of 122%.

CGI generated $16.57-billion in revenue for fiscal 2026, up 4.2%, while adjusted earnings per share increased 8.2% to $8.98. Annual bookings totalled $17.51-billion, and the company ended the year with a $32.07-billion backlog, equivalent to approximately 1.9 times annual revenue.

Treiber thinks the backlog and stronger bookings provide support for a recovery in organic growth, although uncertainty about AI’s impact on traditional IT services could limit the stock’s valuation.

“Maintain Sector Perform, as we see AI-related uncertainty restraining CGI’s valuation towards the low end of its historical range,” he wrote.

CGI also announced an 8.8% increase to its quarterly dividend, reflecting continued cash generation. Operating cash flow reached $2.48-billion for fiscal 2026, representing 15% of revenue.

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