(By Rebecca Lipman)
Federal spending is a top driver of business activity, so it should come as no surprise that the possibility of a government shutdown over spending cuts is a front-and-centre issue for analysts and the media.
The topic becomes additionally worrisome for a number of companies who largely or fully depend on government contracts and subsidies to make ends meet or turn a profit.
The data presented here are based solely on U.S. government contracts and do not include assistance, insurance, grants, loans, or other forms of payment.
Congressional negotiations, which include the work of the Super Committee, are expected to the toughest in years. In light of this, we wanted to write up a list of US government funded companies to watch while Congress crunches numbers.
Here we list companies, sourced from CNBC, that receive the most contracts from the US government. Do you think spending cuts have the ability to cripple their profit margins?
Use the list, along with contract descriptions from CNBC, as a starting off point for your own analysis:
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1. Boeing Co. (BA): Market cap of $47.86B. Engages in the design, development, manufacture, sale, and support of commercial jetliners, military aircraft, satellites, missile defence, human space flight, and launch systems and services worldwide. Total 2010 revenue: $63.3 billion. “Although Boeing’s main sources of revenue are commercial airlines, the Chicago-based company’s defence, Space & Security segment deals primarily with the U.S. Government. That segment accounts for approximately $32 billion of the company’s $63.3 billion in 2010 revenue.” Boeing was contracted $19.4 billion in 2010, and awarded $6.01 billion so far in 2011. The stock has lost 4.9% over the last year.
2. General Dynamics Corp. (GD): Market cap of $22.06B. Provides business aviation, combat vehicles, weapons systems and munitions, military and commercial shipbuilding, and communications and information technology products and services worldwide. Total 2010 revenue: $32.47 billion. “In 2010, General Dynamics of Fairfield, Connecticut engaged in 16,526 transactions with the U.S. Government, totaling approximately $14.8 billion. The largest single award was a $2.48 billion contract for the U.S. Navy on the construction of Virginia-class submarines.” General Dynamics was contracted $14.8 billion in 2010, and awarded $2.49 billion so far in 2011.The stock has lost 6.35% over the last year.
3. L-3 Communications Holdings Inc. (LLL): Market cap of $7.02B. Provides command, control, communications, intelligence, surveillance, and reconnaissance systems; aircraft modernization and maintenance; and government services in the United States and internationally. Total 2010 revenue: $15.68. “The company derived 83% of its 2010 revenues from U.S. Government sources, while another 8% was derived from foreign governments. The Department of defence was L-3’s largest customer, with $11.93 billion in contracts last year.” L-3 Communications was contracted $13.07 billion in 2010, and awarded $1.84 billion so far in 2011. The stock has lost 7.56% over the last year.
4. Northrop Grumman Corporation (NOC): Market cap of $14.58B. Provides products, services, and solutions in aerospace, electronics, information systems, shipbuilding, and technical service sectors. Total 2010 revenue: $34.8 billion. “Northrop Grumman’s largest contracts are also with the Department of defence, including an individual contract for $1.29 billion for work on aircraft carriers. So far in 2011, Northrop Grumman’s biggest individual contract was a $569 million deal with the U.S. Coast Guard for radio navigation equipment.” Northrop Grumman was contracted $16.47 billion in 2010, and awarded $4.04 billion so far in 2011. The stock has lost 1.17% over the last year.
5. Oshkosh Corporation (OSK): Market cap of $1.82B. Designs, manufactures, and markets a range of access equipment, specialty vehicles, and vehicle bodies worldwide. Total 2010 revenue: $9.82 billion (The fiscal year for Oshkosh ends in November 2010.) “According to the company, approximately 72% of 2010 net sales were from the U.S. Government. The biggest contracts for Oshkosh in 2010 were for combat and ground vehicles, three of which eclipsed $1 billion, with the most expensive being $1.13 billion, with all of its $100+ million contracts going to the Department of defence.” Oshkosh was contracted $7.2 billion in 2010, and awarded $1.85 billion so far in 2011. This is a risky stock that is significantly more volatile than the overall market (beta = 2.64). The stock has had a good month, gaining 31.08%.
6. Raytheon Co. (RTN): Market cap of $14.94B. Provides electronics, mission systems integration, and other capabilities in the areas of sensing, effects, and command, control, communications, and intelligence systems, as well as mission support services in the United States and internationally. Total 2010 revenue: $25.18 billion” In 2010, Raytheon’s biggest contract was for $1.06 billion in a deal to supply guided missiles, while so far in 2011, the company’s biggest contract was also for guided missiles in a deal worth $1.39 billion.” Raytheon was contracted $14.9 billion in 2010, and awarded $4.33 billion so far in 2011. The stock has lost 6.23% over the last year.
7. SAIC, Inc. (SAI): Market cap of $4.14B. Offers scientific, engineering, systems integration, and technical services to various branches of the U.S. military and U.S. government. Total 2010 revenue: $11.12 billion. “The company reports that 88-89% of revenues were from government sources over the past three years, identifying key sources of revenue growth arising from relationships with the Department of defence and U.S. intelligence community.” SAIC was contracted $6.9 billion in 2010, and awarded $1.7 billion so far in 2011. Relatively low correlation to the market (beta = 0.4), which may be appealing to risk averse investors. The stock has lost 23.76% over the last year.
8. United Technologies Corp. (UTX): Market cap of $69.69B. Provides technology products and services to the building systems and aerospace industries worldwide. Total 2010 revenue: $54.32 billion. “The biggest contract for United Technologies in 2010 was for $2.02 billion to manufacture rotary wing aircraft from its Sikorsky division. Other large projects include the maintenance and repair of gas turbines, jet engines and other aircraft, several of which cost the government over $400 million each.” United Technologies was contracted $7.7 billion in 2010, and awarded $1.96 billion so far in 2011. The stock has had a good month, gaining 10.6%.
Interactive Chart: Press Play to see how analyst ratings have changed for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.