Intellidsec learned that JPMorgan analysts said aerospace and defense companies will face greater risk of federal budget cuts next year as the Trump administration's Office of Management and Budget (DOGE) seeks ways to reduce the deficit. They lowered their estimates of multiples for Lockheed Martin (LMT.US), Raytheon (RTX.US), Northrop Grumman (NOC.US) and General Dynamics (GD.US) to reflect these risks. JPMorgan revised down its price target for these companies for 2025.
JPMorgan analyst Seth Seifman said: "We believe the US election will bring some potential headwinds to defense stocks, including a fiscally hawkish Office of Management and Budget (OMB), a possible cut in support for Ukraine, and of course the US Department of Defense. However, the outlook is not all pessimistic due to some congressional support for budget increases and a challenging global threat environment."
JPMorgan believes that vendors that provide information technology services to the government also face similar challenges. The bank lowered its earnings multiple expectations for companies including Booz Allen Hamilton (BAH.US), CACI International (CACI.US) and Leidos (LDOS.US). Seifman said: "What DOGE will do is still unclear, and we can consider how service contractors can facilitate their efforts. However, there are some incremental risks."