Blair downgrades five in defense services over DOGE uncertainty

William Blair downgraded the defense technology services contractors in its coverage, Booz Allen (BAH), CACI (CACI), Leidos (LDOS), Parsons (PSN), and General Dynamics (GD), to Market Perform from Outperform without price targets. Yesterday afternoon, Defense Scoop reported that all U.S. Department of Defense agencies have been instructed via a memo to undergo a review of consulting services on a contract-by-contract basis and terminate nonessential consulting programs, the analyst tells investors in a research note. The firm says that while it is unclear what constitutes nonessential consulting services, the Department of Government Efficiency and Treasury Department on Wednesday announced on X that it terminated a $1.9B, five-year Internal Revenue Service IT modernization blanket purchase agreement contract called EPPIS that included agile software development, cybersecurity, and cloud services. A Leidos enterprise IT contract for the Social Security Administration was also canceled, Blair points out. The firm believes that while all the government tech service provider stocks have anticipated “disruption,” the consulting memo “represents a deterioration.” It believes a number of contracts could be at risk for termination while the pipeline of new contracts will decline. There is a zero percent probability that there is no impact to the companies’ financials, Blair contends.