Defense Spending

We have all read and heard tales about a slowdown in military/COTS spending in the first part of 2006. According to new information, we turned the corner in Q-2 of this year, and MIL/COTS spending is increasing.

According to a Dow Jones article today, George Shapiro, market analyst for Citigroup says…

  1. The prime contractors will show about 10% earnings growth in their
    Q-2 financial reports, about to be announced. The primes should all show earnings above expectations.
  2. Army spending in Q2 increased by 23% (compared to last quarter).  
    Air Force spending was up 20%. Navy spending grew by 15%.
  3. These increases in spending were about evenly distributed among the defense contractors.
  4. A lot of this new business has been in international sales (Pakistan, Australia, etc), as well as some in US military sales.
  5. Northrop Grumman has repaired their shipbuilding operations along the Gulf of Mexico (from hurricane damage), and is expected to show growth and good earnings for the 2nd quarter of this year as they get underway building boats.
  6. Boeing, Raytheon, and Rockwell Collins all show strong sales to international airlines and private corporate aircraft.

So, we should now see MIL/COTS sales increase across the US and world defense markets for our VITA members. I had anticipated an uptick in sales activity, either in September (when the budgets are approved), or in November (after the US elections). But, according to this article, we are seeing increases in MIL/COTS sales now. I hope this prosperity arrives on your order books soon.

Regards….Ray Alderman