Accenture plc.’s (ACN) latest contract from the U.S. Department of Navy reinforces the company’s strong business relationship with U.S. Government departments. The U.S. Navy Sea System Command contract is worth up to $16.3 million and requires Accenture to provide mobile maintenance support to the Naval Sea Systems Division.
The deal has a one-year base period and carries two one-year renewal options. Government contracts have emerged as a strength for the company over the years.
As per the terms of the contract, Accenture Federal Services will support the Navy’s electronic Technical Work Documents (eTWD) system solutions and improve the overall enterprise performance. eTWD system solution reduces the resources and time required to compile, issue, execute and certify work, thereby supporting continuous operations.
The deal, which ensures increased efficiencies as well as quantity, will boost the U.S. Navy’s ability to streamline operations across various departments efficiently, improve enterprise performance and promote mission-critical IT solutions. Notably, Accenture’s mobile solutions are customer-friendly and help reduce costs while improving performance. This will help the Navy’s public shipyards to plan, achieve and sustain audit readiness.
Accenture has won a series of government deals in the past. Recently, it was awarded contracts by the U.S. Army at an aggregate value of $53.1 million to support General Fund Enterprise Business System’s (GFEBS) maintenance and daily operations. The continuous deal wins for the company ensure incremental cash flows.
However, these contracts generally have lower margins, which could be a concern.
Moreover, Accenture continues to face competition from companies like Cognizant Technology Solutions (CTSH) and International Business Machines (IBM). Additionally, a strained spending environment as well as significant exposure to Europe may temper growth to some extent.
Nevertheless, improved bookings growth, coupled with good performances in insurance, banking and healthcare sectors reflect a strong demand for Accenture’s services, which in turn are boosting its long-term growth prospects.
Currently, Accenture has a Zacks Rank #3 (Hold).
Meanwhile, investors could consider a better-ranked stock in the same industry like Rambus Inc. (RMBS), sporting a Zacks Rank #1 (Strong Buy).
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