News & Events

Industry Week in Review – January 7, 2011

Despite a lackluster Friday, stocks experienced a modestly good start to the new year with the Dow and S&P up 1%, and NASDAQ up almost 2% for the week. On Thursday, Secretary Gates announced that internal cost-cutting efforts will allow the DoD to largely offset a $78 billion White House funding reduction. About $54 billion would come from DoD-wide overhead reductions and efficiencies, including a freeze on government civilian salaries, $14 billion from lower interest rates and other economic shifts since last year’s plan was formulated, $6 billion in troop cuts for the Army and Marine Corps, and $4 billion from slower purchases and lower prices for F-35 combat aircraft. Several analysts believe that large-cap military contractors could actually benefit from the changes, as funding could still possibly increase in big-ticket items such as ships, long-range strike systems, missile defense, and ISR systems. Given the slight growth provided by Secretary Gates’ roadmap, solid balance sheets, strong cash flows, and a potential for buy-backs will position companies with such characteristics on solid footing.

This week’s big movers:

  • Raytheon Co. (Up 7.6%)
  • L-3 Communications Holdings Inc. (Up 11.0%)
  • Ceradyne Inc. (Up 10.8%)
  • SRA International Inc. (Up 18.9%):
  • Integral Systems Inc. (Up 15.1%):

Relevant transactions:

  • Pragmatics announced on Tuesday that it has acquired Innovative Solutions International (“ISI”)
  • Elbit Systems Ltd. announced on Monday that it has acquired the Brazilian companies, Ares Aeroespecial e Defesa S.A. and Periscopio Equipamentos Optronicos S.A.
  • Esterline Corporation announced on Monday that it has acquired Eclipse Electronic Systems
  • HEICO Corporation announced on Monday that its Flight Support Group has acquired 80% of the assets and certain liabilities of Blue Aerospace, LLC
  • SM&A announced on Monday that it has acquired Potomac-based Cardinal Technologies