IBM Inc. said Monday that it beat profit estimates on cost cutting measures despite slumping sales. A similar scenario played out at IBM's Global Services segment, which is a direct competitor to CGI.
Desjardins Securities analyst told clients in a note that the segment's sales were tripped as short-term bookings fell 14% year-over-year due to the troubling economic environment. That said, long term bookings accelerated quarter-over-quarter, suggesting positive implications for not only IBM, but also CGI in the future.
We believe that investors focused on CGI should be quite pleased with IBM's long-term bookings growth and the sources of that growth being government, healthcare and financials.
In addition, Canada was relatively strong for IBM this quarter. We note that these customer segments and geography are key focuses for CGI, with two-thirds of its revenue coming from government, healthcare and financials, and 60% from Canada.
Mr. Bernofsky maintained his "top pick" rating and C$13 price target, noting the big unknown at present remains how far CGI's clients are pushing out work into future quarters?
As a result, we remain cautiously optimistic going into next quarter's results (May 6), but we remain very bullish on 2010 when we will see some of the new bookings announced this quarter come onstream and start to materialize.