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October 31, 2016Loren B. Thompson, Ph.D

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What Defense Downturn? Why Military Contractors Are Thriving Despite Lower Pentagon Spending (From Forbes)

October 31, 2016Loren B. Thompson, Ph.D

The U.S. defense industry is entering the eighth year of a prolonged downturn in Pentagon demand for weapons, but you would never know that to look at the third-quarter earnings releases of the biggest companies.  Sales are rising and earnings are strong.  Share prices for some companies are up over 300% since the “downturn” began.  So what gives?  Partly it’s just a story of careful financial management, aided by big share buy-backs and the Fed’s low interest-rate policies.  But there are other, more subtle factors at work such as the high concentration of the sector, the rigorous management of multi-decade franchises, recent inroads in foreign markets, targeted application of political skills and the use of new technologies in refining production processes.  I have written a commentary for Forbes here.

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