Large and mid-size defense contractors could benefit under a Donald Trump presidency, but those that sell to foreign partners could see their profits take a hit, according to a report released Tuesday.
The report from Byron Callan, a defense industry expert and director at Capital Alpha Partners, predicts that contractors such as Booz Allen and CACI could do well under a Trump administration. His reasoning is that a Republican in the White House likely means that the GOP will still have control of both the House and Senate as well, which could spell the end of sequestration caps and the beginning of higher defense spending. Trump’s defense plans also call for a larger Navy, which could mean a boon for shipbuilders such as General Dynamics and Huntington Ingalls Industries.
The report also predicted a positive impact for foreign firms Elbit, Rheinmetall, Saab Group and Thales if Trump is in the White House. U.S.-based Leidos would also be a beneficiary.
Other large contractors such as Lockheed Martin and Raytheon, however, could take a hit if Trump is elected, because of their ties overseas.
“Trump’s criticism of Janet Yellen and low interest rates and the possibility of higher inflation in a fiscally-expansive era may spawn [U.S. dollar] strength that could make U.S. defense exports less affordable. Trump’s calls for allies to shoulder a greater portion of their own burden, his seeming-admiration of Russia’s Putin, and possible means-testing to honor defense treaty commitments may yet spawn changes in allied defense spending plans,” the report says.
Lockheed Martin is the prime contractor for the multinational F-35 program, and Raytheon sells bombs and missiles to foreign countries.
It’s less clear how other contractors would fare. If plans for the new B-21 bomber go forward as expected, Northrop Grumman will keep that major defense program, but international exports could be negatively impacted, the report says.
