Bill Loomis (email@example.com) is a managing director at Stifel Nicolaus. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. For additional information and current disclosures for the companies discussed herein, go to the research page at www.stifel.com.
With the public federal IT services firms having reported results for the quarterended Dec. 31, there have been some noteworthy trends. Contract awards have generally been lighter than last quarter. However, I anticipate better contract award activity in the next few quarters.
Areas such as health care, energy, environment and education will probably see new government initiatives that require new IT and service programs to support them.
Public companies that provide federal IT services have continued to see their stock prices rise since mid-August, when most of the companies reported second-quarter results and issued outlooks that excited investors.
We can expect to see larger merger-and-acquisition transactions in the federal market during the next year or two. The aggregate dollar volume of deals is likely to increase while the number of transactions may decline.
Despite the difficult business environment for many federal IT and professional services companies - largely unaffected by the issues facing the broader stock market and economy - stocks of publicly traded companies have fared well so far this year.
The public federal IT and professional services firms will soon report second-quarter 2007 results. I generally expect them to report results in line with projections but to be cautiously optimistic of future results.
The growth rates of the federal IT budget and growth among the publicly traded federal IT services firms have been slowing on average since the Iraq war began because funds allocated to the war have not fully covered the costs and usually have been delayed.
Washington Technology's 2007 Top 100 highlights how broad the federal professional services market has become.
Funding constraints continue to pound on IT companies.