Upcoming earnings reports offer insights into what's ahead in 2020

Most of the publicly-traded aerospace, defense and government services companies will begin to report their latest quarterly financial results starting next week and the following three weeks after that.

Some will also detail how they performed for all of last year, how they expect to do this year and general market conditions in conference calls with Wall Street analysts.

Here is what could be on the agenda.

Guidance (with a caveat)

One way to measure a company’s confidence in both itself and the overall market is looking at the initial forecast range of the top- and bottom-line numbers expected for this year. A majority of publicly-traded government contractors operate their fiscal years in conjunction with the calendar and thus will give some glimpse at what they see for 2020.

The problem here is that many companies -- both hardware and services -- have closed or will close later this year big-ticket mergers or acquisitions that have the effect of boosting revenue or making a combination of equals.

Investors ultimately reward organic growth and that will be a focus of questions surrounding business opportunities and customer appetites to spend.

Speaking of M&A

Here is a shortlist of significant deals waiting to close: Raytheon-United Technologies, BAE Systems-Collins Aerospace military GPS, Leidos-Dynetics and ICF-Incentive Technology Group. Not to mention the ongoing integrations such as L3Harris Technologies and Jacobs-KeyW Corp.

BAE has done its part in explaining why it is paying almost $2 billion for the GPS business currently owned by UTC. Leidos has done the same regarding its $1.65 billion deal for Dynetics. Expect Leidos to be questioned about that again.

Raytheon and UTC have explained why they are coming together and gradually are revealing more as to what the future Raytheon Technologies will look like. Expect more questions there, and maybe some more updates.

Questions about the aforementioned integrations will try to get at this: tangible examples of what the companies are better able to do now than they did before. Recall also that L3Harris has said it is a seller, so there will be questions about divestitures there.

Companies that do not currently have deals in the works will get variants of this one question: anything you looking at?

Big-ticket competitions

Back to Leidos, which last month appeared to have cleared its two largest recompetes that added up to nearly 8 percent of its revenue, or 4 percent each. Both are now under protest by a bidder looking for at least a second chance to wrestle them away. One contract is to run the military’s global information grid and the other is held through a joint venture to restore a former nuclear weapons production site.

Leidos is also in the role of challenger alongside General Dynamics IT in trying to wrestle away Perspecta’s NGEN contract to run the global Navy and Marine Corps network. An award is scheduled for this quarter and is viewed as a scene-setter for the government technology market.

Meanwhile, Perspecta scored a victory of sorts when the General Services Administration and Defense Information Systems Agency decided to pull back their award of the $7.6 billion DEOS contract to General Dynamics IT. Both companies will revise their proposals and the agencies will make a new award for this brand new requirement to roll out Office 365 email, calendar and other back office tools across DOD.

Status updates on all of those competitions are a near-certainty. DEOS aside, here is one item I would like to hear GovCon services companies talk more about in light of how fully-enacted appropriations are in place: what kind of “new new” or “brand new” requirements are you seeing?

Politics

Yes, a real budget is in place for the rest of this fiscal year even though it was enacted late again like in so many years past. And yes, much of those dollars are going to larger contracts of longer durations that in theory should help government contractors see more into the future.

That said, like we have said before: the specter of the current impeachment proceedings and the November elections cannot be discounted as all of that sets the tone for the budget environment. But I do not expect that many questions nor answers beyond what we have heard before.

If interested, the schedule for now goes like this

• Jan. 28: Lockheed Martin and United Technologies
• Jan. 29: Boeing, General Dynamics and Textron
• Jan. 30: Northrop Grumman, Raytheon, CACI International and Tetra Tech
• Feb. 1: Booz Allen Hamilton
• Feb. 4: L3Harris Technologies, Jacobs and Cerner
• Feb. 6: Maximus
• Feb. 12: Perspecta
• Feb. 18: Huntington Ingalls Industries, Leidos and Fluor Corp.
• Feb. 19: ManTech International
• March 10: Parsons Corp.