Industry Week in Review – May 3, 2013

Details emerged on Friday surrounding the DoD’s planned budget reprogramming request, which the department had said would be necessary to address funding shortfalls in certain accounts that came as a result of the continuing resolution (“CR”) and sequestration.  The majority of the reprogramming will be focused on the Army, which, according to the draft document, plans to request $1.34 billion in additional O&M funds and $3.6 billion more in OCO funds.  The Army plans to offset these increases by decreases in certain procurement programs.  At-risk programs include AH-64 Apache build and modernization, WIN-T battlefield communications, and the Joint IED Defeat Organization.  Additionally, the service proposed $730 million in savings by delaying Humvee recapitalizations and MRAP modifications.  Separately, the Air Force has requested a $1 billion addition to its O&M appropriation, funded through reductions of the F-15, C-130, C-135, unmanned systems, and missile and space procurement.

In further budget news, Senate Armed Services Committee (“SASC”) Chairman Senator Carl Levin and Ranking Member Senator James Inhofe have called on Secretary of Defense Chuck Hagel to deliver the Pentagon’s plan for how to enact mandated cuts.  The two Senators said that they saw little potential for Congress reaching a budget agreement that would void sequestration.  Given that neither the CR nor the President’s Budget Request incorporated the reductions, the SASC has requested that the Pentagon provide a detailed blueprint for their enactment by July 1, 2013.

Big Movers

Mercury Systems (Up 20.2%) – shares were up for the week following the company’s announcement of fiscal third quarter results, which beat analyst expectations.  Revenue and EPS were both down year-over year, at $54.1 million and $0.03, respectively.  However, both were an improvement over 2FQ13, which saw a net loss per share of $0.16.

NCI, Inc. (Up 10.5%) – shares were up for the week following first quarter results that exceeded management’s guidance and beat analyst expectations.  Revenue of $91.5 million decreased by 7.6% from 1Q12, however EPS of $0.15 increased from $0.12 in 1Q12.

Relevant Transactions

No relevant transactions for the week.

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