CGI Inc. (TSE:GIB.A) just released its latest quarterly report and things are not looking great. CGI missed earnings this time around, with CA$3.1b revenue coming in 2.7% below what analysts had modelled. Statutory earnings per share (EPS) of CA$1.06 also fell short of expectations by 10%. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for CGI from 15 analysts is for revenues of CA$12.6b in 2020, which is a modest 3.1% increase on its sales over the past 12 months. Statutory earnings per share are expected to accumulate 3.6% to CA$4.76. Yet prior to the latest earnings, analysts had been forecasting revenues of CA$12.7b and earnings per share (EPS) of CA$5.00 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
The consensus price target held steady at CA$112, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values CGI at CA$125 per share, while the most bearish prices it at CA$82.00. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. We can infer from the latest estimates that analysts are expecting a continuation of CGI's historical trends, as next year's forecast 3.1% revenue growth is roughly in line with 3.6% annual revenue growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the are forecast to see their revenues grow 3.5% per year. So although CGI is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for CGI. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. The consensus price target held steady at CA$112, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for CGI going out to 2022, and you can see them free on our platform here..
It might also be worth considering whether CGI's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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