Today's Research on General Dynamics and Smith & Wesson: The Industry Gets Ready for Sequester

Feb 22, 2013, 08:00 ET from StockCall.com

LONDON, February 22, 2013 /PRNewswire/ --

While a last-minute deal reached at the start of this year helped in averting the fiscal cliff, political bickering has meant that sequester is likely to take effect on March 1st. If lawmakers fail to reach an agreement on reducing U.S.'s deficit in the next few days, sequester would result in significant cuts in defense spending. Companies in the Aerospace/Defense Products & Services such as General Dynamics Corporation (NYSE: GD) and Smith & Wesson Holding Corporation (NASDAQ: SWHC) are still hoping for a last-minute deal. StockCall professionals have completed their technical analysis on General Dynamics and Smith & Wesson Holding and these free reports are accessible by registering at http://www.stockcall.com/research  

Defense Spending Cuts

At the start of this year, lawmakers reached an agreement that helped in averting the fiscal cliff. While the deal was welcomed by market participants, it did not resolve the spending cuts issue. Lawmakers now have a week to resolve the spending cuts issue. If they do not, automatic spending cuts known as sequester will take effect on March 1st.

The sequester refers to $85 billion in spending cuts. A major portion of the cuts will be made in defense spending. The Pentagon has already warned that sequester could lead to large scale layoffs and furloughs.

The U.S. is the largest aerospace and defense market in the world. The industry relies very heavily upon the U.S. government contracts. Therefore any cuts in defense spending are not good news for aerospace and defense companies.

While lawmakers now only have a week, a last-minute deal cannot be ruled out. If a last-minute deal is reached and the sequester is averted, it would be a positive for aerospace and defense companies.

International Market and Consolidation  

In case there is no deal before the March 1st deadline, aerospace and defense companies will have to look to international markets to offset the negative impact of defense spending cuts in the U.S. Another trend that could emerge as a result of spending cuts is consolidation in the industry, as companies would look to cut costs in the wake of cuts in U.S. military budget.

General Dynamics Wins Contracts

Despite the looming threat of sequester, General Dynamics has won some major contracts in the last one month. Earlier this month, the company announced that the U.S. Navy awarded General Dynamics Electric Boat a $41.6 million contract modification to perform routine maintenance and modernization work on the USS Hartford. Sign up for the free technical research on General Dynamics Corp. at http://www.StockCall.com/GD022213.pdf  

Last month, the company had announced that its General Dynamics Information Technology business unit was awarded a contract by the City of Los Angeles World Airports.

General Dynamics Corp. reported non-GAAP earnings from continuing operations of $491 million, or $1.39 per share, for the fourth quarter of 2012. The company's revenue for the quarter was $8.1 billion.

Smith & Wesson Holding Corporation's Results Eyed

Investors are now eyeing the results of Smith & Wesson Holding Corporation, which are scheduled to be released on March 5, 2013. Be sure to read our latest technical research on Smith & Wesson Holding Corp. by registering at http://www.StockCall.com/SWHC022213.pdf  

Back in December, the company had reported record results for the second quarter of fiscal year 2013. James Debney, President and CEO of Smith & Wesson Holding Corporation, said that the company's strong results reflect the ongoing successful execution of its strategic plan.

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