- General Dynamics' (GD -0.2%) $9.6B deal for government IT services provider CSRA is pushing several other government service stocks higher, including Leidos (LDOS +2%), CACI International (CACI +3.5%), SAIC (SAIC +2.2%) and Booz Allen (BAH +2.4%).
- “An increasing [U.S. defense] budget going forward gives us cause for optimism that the services market is going to come back to pre-2011 characteristics,” says Daniel Johnson, head of GD's information systems and technology unit.
- RBC Capital analyst Matthew McConnell says the deal price looks "reasonable," and the likelihood is low that another top defense contractor would top GD's offer since most are de-emphasizing their IT services businesses.
- The agreement puts GD's chronically underlevered balance sheet to work in a niche it knows well and without margin dilution given CSRA's premium profitability in the IT services sector, McConnell says.
- Source : Bloomberg First Word
- Now read: The Fall Of General Electric (NYSE:GE) - Still Time To Look Elsewhere
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