GovCon Expert McAleese Offers Analysis of Defense Primes’ Q2 2022 Financial Results

A new McAleese & Associates report shows major defense prime contractors posted sector operating margins of approximately 11 percent in the second quarter of 2022, reflecting limited impact from the current 8.5 percent inflation.

Jim McAleese, founder of McAleese & Associates and a three-time Wash100 winner, presented an analysis of the Q2 2022 financial performance of Boeing (NYSE: BA), General Dynamics (NYSE: GD, L3Harris Technologies (NYSE: LHX), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), Raytheon Technologies (NYSE: RTX), BAE Systems and HII (NYSE: HII).

Almost all of major defense contractors are reporting strong free cash flow and investors are expecting top seven defense primes to return approximately $22.2 billion of that cash flow in the form of dividends and share repurchases, according to the report.

McAleese said defense companies appear to expect 7 to 10 percent higher defense funding in 2023 and project that inflation will start to drop during the second half of 2022 to mid-2023.

He also noted that defense companies saw lower sales and sector profit during the second quarter driven by labor shortages and supply chain disruption.

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