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Investing

Defense Contractors Face $3 Billion in Cuts (XLS, CSC, RTN, ITT, BA, LMT)

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By Paul Ausick Published
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The US Air Force is expecting to save about 5% — $3 billion — of its maintenance and engineering budget by consolidating services and eliminating duplication. The Washington Post notes three companies that are particularly vulnerable to the change: Exelis Inc. (NYSE: XLS), Computer Sciences Corp. (NYSE: CSC), and Raytheon Co. (NYSE: RTN).

Exelis, which completed a spin-off from ITT Corp. (NYSE: ITT) last October, has received $1.4 billion since 2001 under the existing rules. A new, consolidated contract is going out for bid soon, and Boeing Co. (NYSE: BA), Lockheed Martin Corp. (NYSE: LMT), and Bechtel Corp. have indicated that they will be in the running for the new contract.

The three incumbents all see tightening defense budgets as an opportunity to win more business by being more efficient. An company vice-president told the Post, “We see this consolidation as a chance to expand our business with the Air Force.” Raytheon and CSC spokespersons say essentially the same thing.

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About the Author Paul Ausick →

Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.

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