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January 29, 2015February 10, 2015Lt. Col. Mark B. Elfendahl

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What Downturn? Top Pentagon Contractors Turn In Strong Results Despite Soft Demand

January 29, 2015February 10, 2015Lt. Col. Mark B. Elfendahl

With military spending having peaked in 2010 and current expenditures capped under the Budget Control Act, you’d think defense company earnings would be suffering by now.  So far, though, the downturn seems to be taking a surprisingly small toll on profits.  All of the top U.S.-based contractors reported fourth quarter and full year results for 2014 this week, and the story is fairly positive due to a combination of cost-cutting, stock buy-backs, and earnings gains from businesses outside the federal marketplace.  Rising profits are not that hard to understand at Boeing and General Dynamics because they have major exposure to commercial aerospace markets, but even the big defense “pure plays” — Lockheed Martin, Northrop Grumman and Raytheon — seem to be faring remarkably well.  If this is what a defense downturn looks like, imagine how the companies will do in the next boom.  I have written a commentary for Forbes here.

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