Weekly Roundup Jan. 18 – Jan. 22 2016: Analysts Call Defense Stocks Steady in Wild Market & more

Jan. 18 – Jan. 22 2016

A Note From Our President & Founder Jim Garrettson

Volatility in financial markets has become a fact of life all over the world and has sent investors questioning where the opportunities are in the midst of headwinds such as declining commodity prices and fears over an economic slowdown in China.

Our GovCon Index of 30 publicly-traded government contractors has reflected the strong winds of markets in January to the tune of a 9-percent decline for the month.

Nonetheless, one analyst at Credit Suisse has put forth an idea that the best defense against Wall Street’s wild swings may very well be government contracting stocks and defense companies specifically.

According to Barron’s, Credit Suisse’s Robert Spingarn views the current landscape as a “risk-off” market where investors are looking to the safest bets they can find returns.

“Defense lacks significant global economic or currency exposure, and so performance should be more predictable and the resulting cash returns more reliable, ” Spingarn said.

“Further, with the DoD budget inflecting, most companies in the sector should begin to deliver organic growth for the first time in several years.”

Spingarn singled out General Dynamics, L-3 Communications and Raytheon as stocks his team expects to exceed the market return and said investors should hold onto their shares in Huntington Ingalls,  Lockheed Martin and Northrop Grumman.

We will gain a clearer picture of the defense and GovCon industry’s health next week as the U.S.’ five largest government contractors report financial results for both the full 2015 calendar year and the fourth quarter.

Lockheed will state its earnings Tuesday; Boeing and General Dynamics will detail their results Wednesday; and Northrop and Raytheon will report Thursday.

THE WEEK’S TOP GOVCON STORIES
Investment Firm Platinum Equity Inks Deal to Buy PAE
Arlington, Va.-based PAE changes hands after five years under Lindsay Goldberg and the five before that at Lockheed Martin.
Rockwell Collins Raises FY 2016 Earnings Guidance on 1Q Beat; Govt Sales Down 13%
The company received a reinstatement on its federal R&D tax credit and says it will impact financial results positively throughout FY 2016.
General Dynamics IT Finance Chief Mike Garrity Retires
Garrity is a nearly four-decade GovCon financial management veteran who also helped oversee the sale of GTE’s government systems segment to General Dynamics.
FireEye Makes Cyber Threat Intell Push Through $200M iSIGHT Buy
Shareholders in iSIGHT could take in an additional $75 million in cash and stock if the business meets certain targets by FY 2018’s second quarter.
Omniplex Buys Social Intelligence’s Govt Solutions Business; Michael Santelli Comments
Chantilly, Va.-based Social Intelligence develops social media and online data analytics tools for use in background investigations.
Tiffanny Gates Joins Novetta as Federal Division President
Gates is a former vice president from Blackbird Technologies, which Raytheon purchased in 2014 for $420 million.
Juniper to Support USAF’s Data Network Modernization Effort; Bob Fortna Comments
The company will act as original equipment manufacturer for Affigent and ThunderCat for this open network architecture program.
NCR to Help DoD Adopt Multichannel Commissary Retail Platform; Stan Ratcliffe Comments
“Retail One” hubs are built to integrate functions for store and sales channel management, as well as back office software applications.
FAA Extends Cyber Support Contract With CSRA Subsidiary, Plans to Solicit New Proposals in February
SRA International will work under this “bridge contract action” through Feb. 29 and the agency wants to sign with a new vendor by November.
Vencore to Research DARPA Program Obfuscation Methods; Steve Omick Comments
DARPA will work with Vencore’s R&D arm and other partners on ways to defend software from reverse engineering attacks.
CBO: Cyber Bill’s Information System Updates Requirement Would Cost ‘Hundreds of Millions’ Over 5 Years
The legislation directs DHS to deploy cyber defensive and detection systems in government networks and other digital infrastructures.
Report: Ashton Carter Could Reconsider Planned Cut in LCS Procurement
Carter originally planned to reduce Littoral Combat Ship production from 52 to 40 platforms.
Mary Davie: Federal Agencies Achieved 27% in FY 2015 Under Wireless BPAs
The Federal Acquisition Service official also said usage of strategic sourcing vehicles to buy wireless services jumped 500 percent from FY 2014 to 2015.
James Syring: MDA Eyes Kill Vehicle Test in 2018, Seeks Anti-Missile Drone Tech
MDA’s director also said the agency has started work on mature airborne laser technology for use in a high-altitude UAV.

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