Healthcare.gov fiasco won’t have a lasting impact on CGI Group, says Kew

Cheryl Campbell, a senior vice-president at CGI Federal defended her company’s role in the healthcare.gov fiasco. The recent negative press coverage for CGI Group (TSX:GIB.A) is unlikely to have a material or lasting impact, says Cantor Fitzgerald analyst Justin Kew.

CGI Group has been embroiled in the fallout around the poor performance of the healthcare.gov site, which has been plagued by problems since launching on October 1st.

While some, including Marilyn Tavenner, the administrator of the Centers for Medicare and Medicaid Services, have blamed CGI for the website’s problems, the company says the overall mandate was not theirs.

Cheryl Campbell, a senior vice-president at CGI Federal defended her company’s role, which she says was inherently limited.

“CGI Federal and the many other contractors selected to develop the (insurance marketplace) perform under the direction and supervision of CMS,” she said..“CMS serves the important role of systems integrator or ‘quarterback’ on this project and is the ultimate responsible party for the end-to-end performance of the overall (marketplace).”

Kew notes that CGI Group’s backlog is increasing, even without any U.S. government task orders. The backlog of orders, he notes, grew from $18.019-billion in Q2 to $18.747-billion in Q3, and is being replenished faster than it is being drained.

On Thursday morning, before the open, CGI will report its Q4, 2013 results. Kew expects the company will post adjusted EPS of $0.61 on revenue of $2.56-billion, in line with street expectations.

In a research update to clients this morning, Kew maintained his BUY rating and $40.00 target on CGI Group.

___________________________