TD Cowen said investors should be wary of the impact that President-elect Trump’s Department of Government Effectiveness (DOGE) cost-cutting targets could have on several companies. “The DOGE announcement raises concerns about future revenue and profitability for USG (U.S. Government) contractors,” analyst Roman Schweizer said in a note to clients on Friday. “Given the limited results from previous USG reforms, estimates are now It’s too early to say about the potential negative impact on U.S. government contractors, but cuts are possible and will remain uncertain for months,” Elon Musk and Vivek Ramaswamy wrote in The Wall Street Journal on Wednesday. Further increasing the uncertainty behind DOGE’s ambitions, an op-ed published in TD Cowen detailed DOGE co-leaders’ ambitions for the plan, which TD Cowen said was divided into three broad categories of reforms: regulatory rollback, reduction administration and cost savings. In multiple statements, Trump’s close aides, Tesla CEOs Musk and Ramaswamy, wrote that DOGE would “help end federal overspending” by targeting more than $500 billion in annual federal spending, which they said Spending has not been authorized by Congress or is being used in ways that Congress never intended. To find the companies with the greatest stakes in potential DOGE actions, TD Cowen identified the publicly traded government contractors with the highest dollar commitments in fiscal year 2023, both overall and as a single federal department. Check out the names below: The U.S. government’s top defense contractors — including Northrop Grumman, Lockheed Martin, General Dynamics, RTX and Boeing — are NASA, Defense The main beneficiary of financial expenditures by ministries such as the Ministry of Defense and the Ministry of Defence. Defense, aerospace and IT company Leidos Holdings is another company that has received significant funding in sectors such as housing and cities, homeland security, transportation and justice, the firm found. Shares of these defense companies have tumbled over the past month, in part due to concerns that defense stocks are hovering near sky-high valuations and that federal cost-cutting efforts could deal another blow to the companies as the Defense Department closes A large portion of the funds arrived. Pharmaceutical giants such as Merck, Humana and Pfizer may also be affected by potential DOGE cuts as the companies find they receive significant funding primarily through contracts with the Department of Health and Human Services. To be sure, the impact on these companies may also be less than expected, Schweitzer said, given the role Congress plays in regulation and the fact that reducing the number of government employees could lead to more outsourcing, among other factors.
