Investing.com -- Shares of government services companies Booz Allen Hamilton (NYSE: NYSE:BAH), Science Applications (NASDAQ:SAIC) International Corp (NASDAQ: SAIC), ICF International (NASDAQ: NASDAQ:ICFI), Leidos (NYSE: LDOS), and Tetra Tech (NASDAQ: NASDAQ:TTEK) are trading lower Thursday, with drops ranging from 3.5% to 7%. The decline in these stocks comes as investors react to CACI International's reported decrease in quarterly bookings, which raised concerns about potential government spending cuts and their impact on the sector.
CACI International reported a 45% decrease in contract awards for the second quarter, totaling $1.2 billion, down from $2.2 billion in the same period last year. This significant drop has investors worried that customers may be slowing down spending in anticipation of budget cuts, which could affect the broader government services industry.
In light of these developments, Jefferies analyst Sheila Kahyaoglu noted investor concerns but suggested that the reaction might be "overblown," attributing the decline to the "typical lumpiness" in contract bookings. Despite the market's reaction, Kahyaoglu highlighted positive commentary from CACI, indicating that the company is well-aligned with the Department of Government Efficiency's (DOGE) initiatives to modernize technology within the Federal government.
The broader market concern also stems from potential risks associated with President Donald Trump's spending-cut commission, the DOGE, and its implications for government contractors. A report from Truist analyst Tobey Sommer provided a more optimistic view of CACI, pointing out that its capabilities, customer mix, and alignment with DOGE initiatives position it favorably relative to its peers.
Sommer's analysis also included positive notes on CACI's performance, with the company beating top-line and profitability expectations for the fourth consecutive quarter. Despite the lower book-to-bill ratio reported, CACI's backlog growth and strong pipeline suggest a robust outlook, prompting Sommer to raise the FY25 revenue and adjusted EPS estimates.
The recent downturn in government services stocks reflects broader market concerns stemming from CACI's bookings report and fears of government spending reductions. Analysts have provided a mix of caution and optimism, acknowledging the potential impact of budget cuts while also recognizing the strengths of companies like CACI in navigating the current environment.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.