Defense cuts come at a bad time for defense contractors
The $42.7 billion sequestration cuts related to defense - scheduled to take effect Friday - come at a bad time for certain defense contractors that have failed to post strong sales growth in the past three years. The average revenue growth for Lockheed Martin, Northrop Grumman, Raytheon and General Dynamics over the last three years has been -1.9%. The only firm to post revenue growth greater than 2% during that time was Lockheed - which grew sales by 3.8% in 2010. However, some analysts believe that stocks in the sector are cheap and prices reflect anticipated revenue cuts. A Bloomberg story published Friday noted that put calls on General Dynamics and Lockheed Martin are at their cheapest levels in 18 months.