AEROSPACE & DEFENSE : At Your Service: Do Gov. Services Stocks Deserve a Look?

Research evidence excerpt

AEROSPACE & DEFENSE : At Your Service: Do Gov. Services Stocks Deserve a Look?

EQUITIES

AEROSPACE & DEFENSE

At Your Service: Do Gov. Services Stocks Deserve a Look?

Government Services names are out of favor following DOGE, budget and AI scares, but budget26 MAY 2026

Sector Research Report trends look favorable and diverging performance creates idiosyncratic opportunities. Among the

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group, we are (+) rated on Leidos / Parsons, and (-) on Amentum.

Research Analysts & Publishing Entities

Matthew Akers, CFA Life after DOGE

BNP Paribas Securities Corp1 Stocks have de-rated ~40% relative to industrials in the past year, which looks like an overreaction

+1 (201) 951-5967

matthew.akers@us.bnpparibas.com compared to EBITDA estimates down just ~MSD since elections. Performance has varied widely

across the group since 2024, a big shift from the prior four years which saw the companies mostly

Cashen Keeler

trade as a group. We see upside to sentiment as DOGE ends (July 4, 2026) and funding is likelyBNP Paribas Securities Corp1

+1 (201) 989-2413 more balanced into a new Congress next year.

cashen.keeler@us.bnpparibas.com

Budget less “peaky” than defense manufacturing stocksLuke Leone, CFA

BNP Paribas Securities Corp1 The O&M budget that drives services has relied less on one-time reconciliation funding, and has

+1 (201) 772-1868 typically outgrown Modernization (weapons making) in the late stages of the budget cycle where we

luke.leone@us.bnpparibas.com

likely stand today. Federal civilian spending (~40% of services sales) has been under pressure, but

likely gets better support in the next congress. Overall, we see less peak-funding risk for these stocks

compared to our large cap defense universe, although both groups have traded off.