SocGen Cuts CGI Group to Hold from Buy Ahead of Earnings

Societe Generale cut CGI Technologies and Solutions Inc GIB to a Hold from a Buy ahead of Wednesday's earnings report. The analysts did increase their price target for the Canadian stock to C$62 from C$49, roughly US$51.40 from US$40.60. SocGen only rates equities as a Buy that it believes have at least 15 percent of upside potential.

SocGen analysts said that, moving into the second half of 2015, CGI should see topline growth in Europe, though the analysts also reiterated skepticism that this growth could offset declines from Q1. Additionally, SocGen reduced its outlook for more stable revenues over the full year. The analysts said they expect that "the time lag between [when] the macro improvement is noticed and its impact on IT services spending" make stable revenues "unlikely."

For potential catalysts, investors should look to EPS accretion from M&A. On the opposite side, stiffer competition, US budget cuts and offshore services delivery put SocGen's price target at risk.

This year, CGI gained 17.4 percent, compared with just a 2.4 percent gain in the S&P 500. CGI has outperformed over the prior 52 weeks as well, gaining 29.5 percent compared with 13.2 percent gains on the S&P.