Author: Jane Edwards|| Date Published: August 28, 2023
A new McAleese & Associates report shows that defense prime contractors posted a 7 percent to 9 percent rise in sales during the second quarter of 2022 and record-high backlogs as the Department of Defense accelerates contract awards.
McAleese said the sales growth reflects that labor availability has improved and supplier deliveries have started to stabilize.
Most defense contractors saw weaker sector profit growth and lower sector operating margins during the second quarter due to inflation and program execution cost-growth charges, according to the report.
Prime contractors expect to record 8 percent higher free cash flow at about $22.6 billion in 2023 despite Q2 challenges, McAleese stated.
According to the report, most defense primes raised their 2023 financial guidance for earnings per share and sales, projecting a sales increase of 3 percent to 4 percent.
The GovCon expert noted that prime defense vendors are urging Congress to rescind higher corporate taxes under Section 174, which McAleese said could result in a $14 billion increase in cumulative free cash flow between 2022 and 2026.
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