Accenture plc (ACN) recently won two contracts from the U.S. Army at an aggregate value of $53.1 million. Accenture Federal Services has been chosen to support General Fund Enterprise Business System’s (:GFEBS) maintenance and daily operations.
Per the first contract, worth $42.0 million, Accenture would manage GFEBS’s day-to-day processes, including maintenance, integration and support for systems. GFEBS, a global enterprise resource planning (:ERP) system, was formed to support the U.S. Army to provide accurate, reliable and timely financial information in a cost-effective manner. This contract will boost GFEBS’s ability to streamline operations across various departments efficiently, better manage funds and improve enterprise performance.
Per the second contract, Accenture will support the department by providing technical and training assistance thereby helping in the smooth operations of the ERP system. For this, Accenture will be awarded $11.1 million. This will help the Army’s Office of Financial Operations to plan, achieve and sustain audit readiness.
Accenture has been winning federal deals frequently. The company has won a series of government deals in the past. However, these contracts generally have lower margins, which could be something to worry about.
According to the immixGroup, a provider of technology products to the public sector, federal spending on IT is forecast to grow at a CAGR of 2.3%, from $70.0 billion in 2014 to $78.5 billion in 2019. This could increase the amount of deals and eventually act as a tailwind for Accenture.
In spite of regular deal wins, competition continues to increase at a steady pace, especially from companies like IBM (IBM). Additionally, a strained spending environment as well as significant exposure to Europe may temper growth to some extent.
Nevertheless, Accenture has been able to improve its customer base, bookings and performance in the insurance, banking and healthcare sectors. This agreement reflects growth in retail, another important vertical.
Currently, Accenture has a Zacks Rank #3 (Hold).
Investors can also consider F5 Networks, Inc. (FFIV) and Micron Technology Inc. (MU), both carrying a Zacks Rank #1 (Strong Buy).