CGI Group Inc.
CGI is the fifth largest independent provider of information technology services with over 68,000 professionals around the world. Their services include business and IT consulting, systems integration, application development and maintenance, infrastructure management and their annual revenues are over C $10 million. They have delivered reasonably consistent earnings growth and have solid return on capital and return on equity metrics coupled with a reasonable valuation and good balance sheet with low debt to capital.
Ests: 1Q20 2Q20 FY20 FY21
Revs 3.2b 3.3 12.7 13.2
EPS 1.25 1.30 5.16 5.60
+10% +8.5%
P=112.91, no div, D/C=27.7%, TTM EPS 4.81, P/E=23X, FY20 P/E=22X
1Q20 1.23 vs 1.12, +9.8%, est 1.25
Jan 29, 2019, P=112.91, TTM EPS 4.81, P/E=23X, FY20 P/E=22X
Revs +3.1% to 3.05bn, +4.8% ex fx, +1.2% organic, EBIT +8% to 474.1m, EBIT margin 15.5% vs 14.8% (IFRS 16 will benefit EBIT but finance expense washes it out)
Bookings -4.5% to 2.75bn, B/B=0.9, TTM B/B=1.01, Backlog 22.29bn
Western and Southern EU -3.6% or -0.6% ex fx, US Commercial and State Govt +1.5%, Canada -2.2%, US Federal +11.4%, Uk and Aus +0.8%, Central and Eastern EU +5.9% or +9.2% ex fx, Scandinavia +17% or +24.6% ex fx, Finland, Poland & Baltics -2.9% or +0.2% ex fx, Asia Pac +10.9% or +9.8% ex fx
Mgmt discussed longer decision cycles for larger long-term contracts. Some larger contracts being broken into smaller pieces with a phased approached.
Stock sold off hard on slight EPS miss, lower bookings, and deteriorating sentiment due to the Wuhan virus.
Given valuation and results, MSFT, IBM, and OTEX ARE looking more interesting than CGI.
4Q19 1.21 vs 1.09 +11%, est 1.21, FY19 EPS +12% to 4.70
Nov 6, 2019, P=102.06, TTM EPS 4.70, P/E=22X, FY20 P/E=20X
Revs +5.7% to 2.96bn, +7.7% ex fx, EBIT +5% to 457.5m, margin 15.5% vs 15.6%, EPS +11% on lower interest expense, tax rate, and share count. Bookings -3.5% to 3.4bn, B/B=1.15, TTM B/B=1.04, Backlog 22.6bn, B/B soft in Canada, US Federal, and UK/Aus,
Western and Southern EU -0.2%, Northern EU +9.7%, Canada -0.6%, US Commercial and State +2.9%, US Federal +19.4%, US and Aus -0.1%, Central and Eastern EU +12.7%, Asia Pac +8.8%
Company continues to execute well, valuation at 22X trailing EPS is a bit of a premium but the company is delivering solid consistent results and the opportunity to double the business remains. Mgmt says they’re at scale in ~25% of their metro markets so lots of room to grow.
3Q19 1.22 vs 1.08, +13%, est 1.22
July 31, 2019, P=104.37, TTM EPS=4.59, P/E=23X, FY20 P/E=20X
Revs +6.1% to 3.12bn, +6.6% ex fx, EBIT +8.9% to 474.2m, margin 15.2% vs 14.8%, Bookings 2.95bn, B/B=0.95, TTM B/B=1.07, Backlog 22.42bn , flat y/y
Spent 519m on acquisitions (Acando mostly complete, SCISYS still outstanding)
UK and Aus soft, -1% ex fx after strong 2Q, other segments decent to strong (Northern EU +17.9%, US Federal +8.7%, Central and Eastern Europe +18.4%, Asia Pac +8%, while Canada +1.1%, Western and Southern EU +2.7%, and US Commercial and State govt +1.4%
Stock soft following results but stock was at a recent high, might look pricey but solid execution plus recent acquisitions make FY20 estimates look a bit low.
Bookings a bit light but reflects lumpiness due to longer sales cycle and larger/lumpier projects (just announced a $223m booking)
Mgmt sees plenty of organic and acquisition opportunities to double the business in 5-7 years.
2Q19 1.17 vs 1.04 +12.5%, est 1.17
May 1, 2019, P=96.43, TTM EPS 4.45, P/E=22X, FY20 P/E=19
Revs +4% to 3.1bn, +4.7% ex fx, adj EBIT +7% to 454.1m, margin 14.8% vs 14.4%, Bookings -7% to 3.3bn but B/B=1.06 still solid, Backlog +4% to 22.9bn
Solid Rev contributors ex fx: U.S. Commercial and State 6.2%, U.K. +9.9%, Central and Eastern Europe +12.8%, no segments down organically.
EBIT performance: Western and Southern Europe -15% due to 1 less billable day in France, a business solution impairment, and weak performance in Brasil. Canada -6.9% due to cost optimization efforts and temporary lower utilization in communications and utilities. U.K. -7.5% due to court ruling adjustment and a project cost adjustment. Central and Eastern Europe -5.7% due to a project cost adjustment and severance in Netherlands. Northern Euope +6.7%, U.S. Commercial and State +58% due to better mix and fruits of restructuring, U.S. Federal +5.4%, Asia Pacific +40% due to fx and better profitability.
U.S. Federal continues to have strong bookings (TTM B/B=1.64)
Stock has still done well, still not cheap but still executing well and positioned to deliver reasonable value as company grows richer mix of business, still view it as a core holding but might be worth a trim to something that has better relative value.
1Q19 1.12 vs .99, +13%, est 1.11
Jan 30, 2019, P=86.16, TTM EPS=4.32, P/E=20X, FY19 P/E=19X
Revs +5.2% to 2.96bn, +4.5% ex fx EBIT +8.1% to 439.2m, margin 14.8% vs 14.4%, Bookings +1.8% to 3.03, B/B=1.02, Backlog +10.6% to 2.23bn
43% of bookings from new business.
Share repurchase plan to purchase up to 10% of public float
Some customers, particularly in manufacturing and retail, have started to adjust priorities to slowing growth, focusing IT spend on efficiencies and cost savings, not seeing a pullback in spending though.
Stock has done well in this environment, while stock isn’t cheap, I still view the stock as a core holding.
4Q18 1.09 vs .93, +17%, est 1.07, FY8 4.19 vs 3.65
Nov 7, 2018, P=79.12, TTM EPS 4.19, P/E=19X, FY19 P/E=17X
Revs +7.3% to 2.8bn, +5% ex fx, +2% organic, EBIT +10%, margin 15.6% vs 15.2%, Bookings +21% to 3.5bn, B/B=1.26, Backlog +8.5% to 22.6bn
FY Bookings +19.5% to 13.5bn, B/B=1.17, CFO +10% to 1.5bn, FCF 1.2bn
More than half the bookings were new business again (45% for the year).
See customers gradually growing outsourcing over the next 3 years, continuing current trend.
Restructuring actions are complete and should benefit FY19
Results continue to be solid, results appear to be accelerating, solid bookings continue.
See continued revenue and earnings growth in fY19 but no specifics, Continue to target doubling CGI in 5-7 years
3Q18 1.08 vs .93, +16%, est 1.08
August 1, 2018 P=83.98, TTM EPS=4.02, P/E=21X, FY 19 P/E=18X
Revs +3.7% to 2.9bn, +3.8% ex fx, EBIT +9.1% to 435.3m, margin 14.8% vs 14.1%, Bookings +29.7% to 3.47bn, B/B=1.18, Backlog 22.4bn
Results are solid, I’d expect growth to accelerate given strong bookings over past number of quarters.
2Q18 1.04 vs .91, est 1.04 up from 1.01
Revs +8.3% to 3bn, +4.9% ex fx, EBIT +7.4% to 424.4m, margin 14.4% vs 14.5%, Bookings +28% to 3.5bn, B/B=1.19 (7 of the last 8 quarters have had B/B>1), Backlog 22.0bn
Solid results continue and appear the be strengthening across many of their markets.
1Q18 .99 vs .90, est .97
Revs +5.3% to 2.8bn, +4.9% ex fx,, EBIT +2.4% 406.3m, margin 10.1% vs 10.3%,
Bookings +0.5% to 3bn, B/B=1.06 , Backlog 21.1bn
Solid results and decent valuation.
4Q17 .93 vs .89, est .94, FY17 EPS 3.65 vs 3.46
Revs +1% to 2.6bn, +2.5% ex fx, EBIT slightly up to 395.8, margin 15.2% vs 15.3%, Bookings +1.9% to 2.9bn , B/B=1.12, Backlog 20.8bn
Using AI and Blockchain in their technology practice.
FY18 plan to deliver organic growth at or above the markets in which they compete and to deliver double digit EPS growth.
3Q17 .93 vs .89, est .95
Revs +6.4% to 2.8bn, +5.2% ex fx, EBIT +2.2% to 399.1m, margin 14.1% vs 14.6%, Bookings 2.67bn, Backlog 20.8bn, ex fx, US +12.5%
Mgmt looking to profitably double the size of CGI in 5-7 years
2Q17 .91 v .86, est .93
Revs flat at 2.7bn, (+5.6% ex fx, +4.4% organic), EBIT 14.5% vs 14.2%, Bookings 2.7bn, TTM B/B=1.08
Backlog 20.97bn vs 20.7bn
Organic growth accelerating (but difficult to see due to fx headwinds)
Net debt 1.5bn, down 433m y/y
Nice to see organic growth accelerating (co can’t control currency), not the cheapest stock out there but they’ve done a good job improving profitability with adjusted net income growing ~10% for a number of quarters and improving their balance sheet, mgmt. aspiration to double the size of the company.