CGI Federal is a subsidiary of CGI Group (CGI Group Stock Quote, Chart, News, Analysts, TSX:GIB.a) a global information technology (IT) and business consulting services company. CGI Federal specifically focuses on providing IT and consulting services to government agencies in the United States. It offers a range of solutions and expertise in areas such as cybersecurity, cloud computing, data analytics, enterprise resource planning (ERP), systems integration, and managed services.
CGI Federal works closely with federal, state, and local government agencies to help them modernize their IT systems, improve efficiency, enhance cybersecurity, and deliver better services to citizens. It has a strong presence in various sectors, including defense, intelligence, healthcare, financial services, and civilian government agencies.
The company collaborates with its clients to design, develop, implement, and maintain complex IT solutions tailored to their specific needs. It combines its industry knowledge, technological expertise, and deep understanding of government processes to deliver innovative and secure solutions that address critical challenges faced by government organizations.
CGI Federal has been involved in several high-profile government projects, including the development and implementation of large-scale IT systems, digital transformation initiatives, and cybersecurity programs. Its mission is to support government agencies in achieving their goals and delivering value to the public through the use of advanced technology and strategic consulting services.
CGI Federal was founded in 2002. It is a subsidiary of CGI Group Inc., a global information technology (IT) and business consulting services company headquartered in Canada. CGI Group Inc. was established in 1976, and CGI Federal was later established as its subsidiary to specifically focus on providing IT services to government agencies in the United States.
CGI Federal and Healthcare.gov
CGI Federal was involved in the development and implementation of the healthcare.gov website, which experienced significant issues during its launch in October 2013. The healthcare.gov website was created as part of the Affordable Care Act (ACA), commonly known as Obamacare, to provide a platform for individuals to enroll in health insurance plans.
The initial rollout of the website was plagued by technical problems, including slow page load times, error messages, and difficulties in completing the enrollment process. These issues led to widespread criticism and frustration among users, as well as political backlash. The website’s rocky start became a major news story at the time.
While CGI Federal was the main contractor responsible for the development of the healthcare.gov website, it is important to note that the project involved several other subcontractors and agencies. The issues with the website were not solely attributed to CGI Federal but were the result of various factors, including complex technical requirements, tight deadlines, and coordination challenges among multiple stakeholders.
After the launch issues, the government initiated a “tech surge” to address the problems and improve the performance of healthcare.gov. Ultimately, CGI Federal’s contract was not renewed, and the Centers for Medicare and Medicaid Services (CMS) terminated its contract with the company in 2014. The development and maintenance of the website were subsequently transitioned to other contractors.
It’s worth mentioning that the healthcare.gov website has undergone significant improvements since its initial launch, and it has been functioning more smoothly in recent years. However, the initial problems associated with its launch did bring attention to the challenges involved in implementing complex IT systems on such a large scale.
What is CGI Group?
CGI Group Inc., commonly known as CGI, is a multinational information technology (IT) and business consulting services company. It is headquartered in Montreal, Canada. CGI is one of the largest IT services providers globally, serving clients across various industries in both the public and private sectors.
The company was founded in 1976 by Serge Godin and André Imbeau. Initially, it started as an IT consulting firm in Canada and gradually expanded its services and geographic presence through organic growth and acquisitions. Today, CGI operates in more than 40 countries and has a diverse portfolio of clients.
CGI offers a wide range of services, including IT consulting, systems integration, application development and maintenance, infrastructure services, cybersecurity, data analytics, and business process outsourcing (BPO). The company provides solutions to help organizations modernize their IT systems, optimize business processes, enhance cybersecurity, and harness the power of emerging technologies.
CGI serves clients in various sectors, including government, healthcare, financial services, telecommunications, utilities, manufacturing, and retail. Its client base includes government agencies, major corporations, and medium-sized businesses. The company prides itself on its client-centric approach, aiming to understand clients’ unique needs and deliver tailored solutions to drive their success.
CGI’s business model emphasizes building long-term relationships with clients, focusing on quality, collaboration, and delivering value. It combines industry expertise, technological innovation, and a global delivery network to help clients navigate the complexities of the digital world and achieve their business objectives.
Analyst Opinions of CGI Group
In early February of 2023, National Bank Financial analyst Richard Tse raised his expectations on Canadian IT consulting juggernaut CGI Inc Tse moved his target price from $135 to $140 per share, saying CGI remains a core tech holding.
Looking at the fiscal Q1 numbers, Tse said the $3.45 billion topline was ahead of his forecast at $3.29 billion as well as the consensus at $3.33 billion, while adjusted EPS at $1.66 per share was also above his forecast at $1.61 and the Street at $1.60.
Tse pointed to the company’s increase in headcount as a leading growth indicator and said that while acquisitions will continue to be a contributor to growth for GIB.A, the company’s organic growth has been even more impressive, at an estimated 7.4 per cent year-over-year for the Q1.
“We believe CGI is moving back to its previous growth trajectory (both organic and inorganic) pre COVID,” Tse wrote. “Bottom line, we continue to believe CGI has more potential for outperformance given its combination of growth and defensive attributes (e.g., recurring revenue and cash flow, long-term contracts).”
Along with the raised target, Tse reiterated an “Outperform” rating on CGI and said despite the more difficult economic climate, the company is preserving its profit margins and showing prudent cash management.
“[W]hile macro headwinds continue to have the potential to moderate investment, we believe CGI’s market position and cost savings/efficiency service offerings combined with its operating prowess offers,” Tse said.
More broadly, TipRanks list nine analysts covering CGI Group, all of whom recommend the stock as a “Buy”.