click for larger graphic

 

 

Here’s a little surprise: The top military contractors have all been doing pretty well since Sequestration hit.

I know what you’re thinking: They already got hit in anticipation of Sequestration. Only they didn’t.

Boeing (BA) and Oshkosh OSK are near 52 week highs, while United Technologies (UTX) and McKesson (MCK) 20% are at all time highs. (Table below)

So much for the impact of these government cutbacks on Military contractors . . .

 

See also:
Chuck Hagel on defense budget cuts under sequestration: ‘We’re adjusting to the realities’ (NBC)

The case for the sequester’s defense cuts (WonkBlog)

McKeon ‘Very Concerned’ About Sequester’s Military Impact  (Washington Wire)

 

 


 

TOP 10 US Military Contractors Performance since March 1
Lockheed Martin LMT 5%
Boeing BA 10% 52 week highs
General Dynamic GD 3%
Raytheon RTN 5%
United Technologies UTX 3.40% All time highs
SAIC Inc SAI 5%
L-3 Communications LLL 3%
BAE Systems BA:L N/A
Oshkosh Corp OSK 5.70% Near 52 week highs
McKesson Corp MCK 4.20% All time highs

Category: Markets, Trading, Valuation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “Sequestration Impact on Top 10 US Military Contractors”

  1. ex1 says:

    A better way to view this is perhaps at the multiples, considering the balance sheets and volatility in earnings they would look cheap but considering the risk of sequestration like events, probably not.

  2. postpartisandepression says:

    so this now means that the republicans will not compromise and we are stuck with the sequester.

  3. ilsm says:

    As it seems to be going; DoD suppliers (franchisees, whose franchiser is their customer who is looking out for them) will continue to be in a growth industry with socialized levels of profit, it will be a bit slower than GDP.

    Sequester cuts are significantly smaller than average post WW II DoD “drawdowns. “Management” has been all over “caring for the health” of the military industry base, meaning profits are assured and sequester, at worst leaves the DoD budget at $500B constant dollars, while post Vietnam and Post Cold war draw downs went to $400B constant. DoD sequester cuts are to unobligated balances in accounts.

    A lot of the sequester cut is against civilian employees. Which grew in DoD by nearly 160,000 since 2003.

    The largest DoD reductions will be to overseas operating accounts which pay for Afghanistan and recapitalizing things back from Iraq. Unlike Vietnam these wars on Terror were paid for “off budget” so that lots of money will be claimed, but reductions to base DoD spending will be to growth.

  4. capitalistic says:

    Sure. The small and medium-sized contractors are the ones that are losing out. Large contractors have politically-linked contracts and diversified business models.

  5. Scott Frew says:

    So much for the impact of these government cutbacks on Military contractors . . .

    Barry, did you mean to write, “So much for the impact of these government cutbacks on the stock prices of Military contractors”, or are stock prices now perfect reflections of the health of the underlying businesses?

  6. Manofsteel11 says:

    Well, if the most optimistic math does not resolve the fiscal/debt crisis through budget cuts and/or tax increases and/or real growth, what else is there to hope for?…
    Also, see how the Russian Navy is helping out to fuel this trend (focusing on energy dominance) with Syria, Cyprus, Turkey, Egypt, Iran et. al. signaling the shape of things to come:
    http://rt.com/news/fleet-mediterranean-russia-ships-390/

  7. Init4good says:

    So much for the sequestration impact of their stock prices/ valuation. Nobody ever said that stock prices would be impacted. Stock prices are little impacted by reality. These companies are just as bloated as the fed bureaucracy. Correction: MORE bloated.

  8. wallywalla says:

    What most people don’t realize is that the cuts have not really kicked in yet. For example, civilian furloughs/pay cuts of 20% start May 1st, as federal employees have to be notified 30 days ahead of time. Also, although the most contracts will have been funded through the end of the year (fiscal, calendar, etc.), new contracts for new projects are most likely not going to get approved over the next few months. The bottom line is that the pain from these cuts is yet to come.

  9. [...] He and countless others are only now questioning the wisdom of going to war with no clear plan. Only people with maniacal minds like McCain and Chaney cling to the horribly ill-thought ideology that everything can be fixed when we unleash the dogs of Lockheed-Martin, Northrup-Grumman, Boeing, Raytheon and others. [...]