Computer Sciences Corporation (CSC) recently announced that it has won a task order from the States Naval agency, whereby it will provide program management support to the Strategic and Theater Sealift Program Office. The office is responsible for enhancing the Navy’s sealift capacity of delivering military weapons/vehicles on the war front.
The contract was awarded under the agency’s Naval Sea Systems Command SEAPORT-Enhanced contract. The one-year base period contract has four one-year renewal options, with an estimated total contract value of $113.0 million.
Per the terms of the task order, Computer Sciences’ program management support will cover areas such as acquisition document preparation, financial management, test and evaluation, integrated logistics, systems integration and technical/engineering. Computer Sciences will thereby support naval officers in the execution of any upcoming war-fighting plan.
The company first won this contract in 2004. Subsequently, it continued to serve the U.S. Navy in several areas, resulting in a long-standing relationship. Earlier this month, the naval agency opted for Computer Sciences’ streaming video technology. In February, the technology solutions provider received a U.S. Navy engineering contract worth $38.0 million, which the company was required to provide engineering support to the Naval Air Warfare Center Weapons Division.
Computer Sciences has never found much difficulty in attracting government deals. Apart from Government orders, the company has also won some big ticket private orders in the recent past. Additionally, CSC has a large project pipeline and continues to augment it at regular intervals.
Low-margin government deals will continue to put a lid on gross margin expansion. Also, the growing uncertainty regarding the U.K. National Health Service contract, negative pre-announcements of the company’s fourth quarter results, intense competition in the IT and cloud computing space from both small and big players such as Accenture plc (ACN) and Hewlett-Packard Company (HPQ), its European exposure and strained federal budgets make us bearish on the stock.
Currently, CSC holds a Zacks #5 Rank (implying a short-term Strong Sell rating).
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