Ross Wilkers

MARKET OUTLOOK

How GovCon earnings reports might review 2020 and beyond

For many publicly-traded government contractors, the next handful of weeks will see them report their financial results for the fourth quarter and all of last calendar year.

It also means telling investors just how they got to the end of 2020 and through what many companies have described as their most challenging ever, even though the government market largely got through it in good shape compared to other sectors.

Here is a smorgasbord of what could be on the agenda of the executives talking to Wall Street and the analysts asking the questions.

Political and budget winds of change (remix)

Yes, I highlighted this one in the third quarter preview back in October. But that was before the federal election in November that did not result in divided government. Joe Biden is the president and Democrats effectively control the legislature, though by a razor thin margin.

One piece of good news has transpired since the third quarter -- the government has a fiscal year 2021 budget in place, albeit signed into law just shy of three months late. 

One big to be determined item on the budget front is what will Congress and the new Biden administration come up with in the next coronavirus relief package as the current one expires in March.

Everything else mentioned in October still are main talking points: flattening or declining budgets to offset coronavirus relief spending and which agencies could be bill payers in light of the debt accumulated due to the COVID-19 stimulus.

Acquisitions closed and/or in the works

The list of significant public company transactions announced or closed over the past two-to-three months includes but certainly is not limited to:

Phew. Click each link to review them all. Lockheed will certainly go through an extensive antitrust review process that could be asked about, Teledyne and AeroVironment could see the same given those are platform-focused deals, while the rest are in government services that has so far not gotten close regulatory scrutiny.

For those integrating deals, the question is how is the acquirer looking to make the most of them. For the deals in the works, it’s for updates on the antitrust process and integration planning.

Two other items for thought. What kind of competition do cashed-up private equity firms pose for assets out on the market? Could any other "not large" companies be considering the same option Aerojet Rocketdyne chose?

Some other business items

How companies are continuing to navigate a world of working with customers with CARES Act Section 3610 reimbursements still in the picture, updates on the health of the supply chain and the small-to-medium businesses in it, plus the future of work after vaccinations en masse.

Speaking of the vaccine

It seems safe to assume that any new COVID-19 relief package that is enacted will have new funding to increase production of the vaccine and to support the distribution of it.

The Defense Production Act is also likely one of several tools the Biden administration will apply to speed up both the manufacture and delivery.

Simply put: I would not put it past an inquisitive and curious analyst or two to ask the GovCon companies if they have a role in that effort given that law’s name and what is needed to make sure citizens can get the needle.

The schedule of calls

Some companies have yet to give us the date and time of when they plan to speak with public investors. But here is what I have on the calendar so far:

Jan. 26 -- Raytheon Technologies and Lockheed Martin

Jan. 27 -- General Dynamics, Boeing, Teledyne Technologies, Textron and CGI

Jan. 28 -- CACI International, Northrop Grumman and Tetra Tech

Jan. 29 -- Booz Allen Hamilton, L3Harris Technologies and Honeywell

Feb. 2 -- Mercury Systems

Feb. 4 -- Maximus

Feb. 9 – Jacobs

Feb. 10 -- ASGN and Cerner

Feb. 11 -- Huntington Ingalls Industries

Feb. 17 -- ManTech

Feb. 23 – Leidos

Feb. 24 -- Parsons Corp.

Feb. 25 -- ICF

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also connect with him on LinkedIn.

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