12:59 PM EST, 12/12/2024 (MT Newswires) -- CGI said it is acquiring Daugherty Business Solutions, St Louis-based professional services business, for an undisclosed sum.

National Bank views this as a small tuck-in acquisition for CGI, but notes that it expands CGI's regional channel, which is consistent with the company's metro market strategy - tactically adding regional channels to leverage CGI's broad services. Additionally, it adds more commercial exposure, which analyst Richard Tse believes will be a company focus in FY25.

Daugherty's customer base includes AbbVie, AB InBev, Bayer, Cigna, Mastercard, and Home Depot. For the record, CGI's U.S. Commercial revenues (categorized by CGI as U.S. Commercial & State Government) represented ~16% of FQ4'24 revenues.

Given the estimated size of the transaction and CGI's ~$3 billion in available liquidity (along with a low leverage ratio of 0.4x), Tse thinks this leaves plenty of runway for CGI to pursue more acquisitions, which he believes will accelerate in FY25.

"We continue to believe CGI is a premium operator in IT Services. When combined with our expectation for accelerating M&A, attractive defensive attributes (e.g., recurring revenue and cash flow, long-term contracts), and continued execution in what's been a challenging market, we see incremental upside for CGI."

Maintain Outperform rating with a price target of $185.

Price: 161.45, Change: -0.88, Percent Change: -0.54