US defense shares, government contractors fall after Trump efficiency picks

Booz Allen Hamilton Holding

15/11/2024 21:17

NEW YORK, Nov 15 (Reuters) - Shares of defense companies
and government contractors were lower on Friday, extending
recent losses amid uncertainty surrounding President-elect
Donald Trump's proposed Department of Government Efficiency.
    Trump, a Republican who won last week's election against
Democratic Vice President Kamala Harris, this week named Elon
Musk and former Republican presidential candidate Vivek
Ramaswamy to co-lead the proposed efficiency department, an
entity Trump indicated will operate outside the confines of
government.
    Among defense contractors, shares of General Dynamics  GD.N 
fell 1.5% on Friday, while Lockheed Martin  LMT.N  was off 0.8%
and Northrop Grumman  NOC.N  was down 1.3%.
    The S&P 500 Aerospace & Defense index  .SPLRCAERO  was down
0.6%.
    Shares of government contractors also continued their recent
slide on Friday, including Leidos Holdings  LDOS.N , which was
down 4.4%; Science Applications International  SAIC.O , which
was down 2.8%; and Booz Allen Hamilton  BAH.N , which fell 3%.
    General Dynamics was down about 7% for the week, while
Leidos fell 19%. Both stocks suffered their biggest weekly
percentage drops in more than four years.
    JP Morgan analysts wrote in a research note Thursday that
the trigger for the decline in the government contractors'
shares signals concern about the efficiency department "and how
it may result in budget cuts and policy changes that reduce
contractor earnings." 
    The Musk and Ramaswamy picks were among some others this
week by Trump, including Robert F. Kennedy Jr. to lead the
Department of Health and Human Services and Pete Hegseth to be
secretary of defense.
    "It's creating a lot of disruption and uncertainty with
respect to industries that are subject to government
regulation," said Rick Meckler, partner at Cherry Lane
Investments, a family investment office in New Vernon, New
Jersey.
    "It's unclear how many of these selections will ultimately
be approved ... but corporate America and investors in corporate
America like a more certain path where they can value companies
based on expected earnings and growth, and there are some
radical selections here that could potentially lead to dramatic
changes."

 (Reporting by Caroline Valetkevitch, Lance Tupper and Lewis
Krauskopf; editing by Jonathan Oatis)
 ((caroline.valetkevitch@thomsonreuters.com))