Pentagon Awards $350M Defense Contracts - Analyst Blog

The U.S. Department of Defense has resumed efforts to strengthen its artillery after budgetary woes ebbed with the passing of Obama's $1.1 trillion Omnibus spending measure in Jan 2014. The bill allows Pentagon to utilize as much as $93 billion for buying weapons and another $63 billion for advancing research and development in the sector. In an attempt to optimally utilize the funds, Pentagon has recently awarded 13 defense contracts aggregating to about $305 million.

The companies receiving most of the contracts include General Electric Company GE, CACI International Inc. CACI and FLIR Systems, Inc. FLIR.

General Electric received a two-year option contract for providing critical service for managing the digital imaging network-picture archive communication system for all the core U.S. military facilities including army, navy, air force, marine corps as well as the civilian agencies by the government. This contract is an extension of an earlier two-year contract awarded by Pentagon to this Zacks Rank #4 (Sell) conglomerate. It can be further extended by one year. The fund allotted in the first phase of the project is approximately $73 million.

CACI International's contract entails it to offer diverse services to the U.S. Army including logistics and engineering services as required by its various bases. The company will be providing these services till Dec 2014. The $27.1 million contract includes the overall costs as well as a pre-defined fee. In 2013, revenues derived from the Department of Defense consisted of more than 70% of the total revenues of this Zacks Rank #3 (Hold) company

FLIR Systems received an $18.2 million contract for supply of turrets for undisclosed weapon systems in naval operations. This Zacks Rank #4 firm is the sole provider for these turrets that are required to be completed by May 30, 2014.

Other major players that received contracts from Pentagon included Rockwell Collins Inc. COL and Lockheed Martin Corporation LMT.

Last year, most of these companies reported declining revenues from government projects. The decline was owing to negative impact from sequestration, budgetary constraints, funding delays and stringent regulatory compliance by the government. However, a welcome respite to the budgetary woes bodes well for these companies and is likely to augment both top and bottom lines in the upcoming quarters.