Defense, government contractor stocks extend recent slide as investors eye DOGE

Parsons

15/11/2024 17:06

** Shares of defense firms and government contractors continue
recent losing streak on Fri as Wall Street eyes potential impact
of a second Donald Trump administration
    ** General Dynamics  GD.N  off 1.4% on Fri, after stock
plunged nearly 7% on Thurs
** Peers Lockheed Martin  LMT.N  Northrop Grumman  NOC.N , RTX,
 RTX.N  formerly Raytheon, and L3Harris  LHX.N  also down in
session, adding to steeper losses on Thurs, when S&P 500
Aerospace & Defense index  .SPLRCAERO  sank 3.6%
    ** Stocks of government contractors diving again on Fri:
Leidos  LDOS.N  5%, Science Applications International  SAIC.O 
~6%, Booz Allen Hamilton  BAH.N  3%, CACI International  CACI.N 
3%
    ** "The direct trigger is emerging concern about the
Department of Government Efficiency (DOGE) and how it may result
in budget cuts and policy changes that reduce contractor
earnings," JP Morgan wrote in research note on Thurs
** U.S. President-elect Trump on Tues named Elon Musk and former
Republican presidential candidate Vivek Ramaswamy as heads of
the newly created agency
** Impact from DOGE is "very far from clear", JP Morgan said,
adding "more uncertainty around future results along with
headline risk could continue to pressure contractor valuations"
    ** Jefferies in note on Thurs said delayed selloff in IT
services names post-election reflects increasing uncertainty and
likely volatility under the new administration, including
introduction of DOGE
** In note on Weds, Truist analysts said should Pentagon
spending come under scrutiny, "costly weapons systems that are
years behind schedule,
failing to meet capability and readiness needs, and incur
excessive sustainment costs are a likely priority"
    ** Should this occur, largest traditional defense
contractors such as LMT, RTX, Boeing  BA.N , GD and NOC would be
at most risk, Truist said

(Reporting by Lance Tupper and Lewis Krauskopf)
((lance.tupper.thomsonreuters.com@reuters.net
lance.tupper@tr.com 1-646-279-6380))