Analysts See Train Wreck in Aerospace and Defense if Congress Fails to act on Sequestration (LMT) (NOC) (RTN) (GD_
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A report required under Sequestration Transparency Act underscores the importance of a new, Congressional deficit-reduction plan before the 2013 forced cuts go into effect. The e Office of Management and Budget's Sequestration report points to uncoordinated, painfully and illogical cuts to various areas of government spending, and could be disruptive to the U.S. economy.
In the aerospace and defense sector in particular, failure to act will result in a 9.4 percent reduction in non-exempt defense funding, totaling $54.5 billion, and a 8.2% cut in nondefense discretionary funding. Analysts at Jefferies say the impact at the major function level of the budget is stark.
"Only a select few, we believe, understand that little of the DoD budget is really able to be cut immediately," said analyst Howard Rubel.
"The report points out that the Sequestration would be deeply destructive to national security, domestic investment, and core government functions," said Rubel. "The Transparency Act report underscores Sequestration is bad policy and a 'blunt and indiscriminate instrument.'"
Total non-defense spending is to be reduced by $54.7 billion in FY13, of which $43.6 billion is to be taken from discretionary non-defense accounts, with the remainder from Medicare.
Defense and aerospace companies like Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), Raytheon Co. (NYSE: RTN) and General Dynamics Corp. (NYSE: GD) are on high alert for cuts.
In the aerospace and defense sector in particular, failure to act will result in a 9.4 percent reduction in non-exempt defense funding, totaling $54.5 billion, and a 8.2% cut in nondefense discretionary funding. Analysts at Jefferies say the impact at the major function level of the budget is stark.
"Only a select few, we believe, understand that little of the DoD budget is really able to be cut immediately," said analyst Howard Rubel.
"The report points out that the Sequestration would be deeply destructive to national security, domestic investment, and core government functions," said Rubel. "The Transparency Act report underscores Sequestration is bad policy and a 'blunt and indiscriminate instrument.'"
Total non-defense spending is to be reduced by $54.7 billion in FY13, of which $43.6 billion is to be taken from discretionary non-defense accounts, with the remainder from Medicare.
Defense and aerospace companies like Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), Raytheon Co. (NYSE: RTN) and General Dynamics Corp. (NYSE: GD) are on high alert for cuts.
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