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Wells Fargo downgrades government services

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Wells Fargo downgraded ratings of its government services sector last week ahead of sequestration and across-the-board defense cuts.

The firm downgraded Northern Virginia firms Booz Allen Hamilton, CACI International, ICF International, ManTech International, NCI Inc. and SAIC from market perform to underperform.

During its change, the firm said:  “While we have had an Underweight sector rating for Government Services for some time, we now believe that volume/pricing pressure is accelerating and the near-term business interruption from a likely (in our view) ‘Sequestration’ impact should lead to lower results with particular impact on the first and second calendar quarters of 2013, and potentially some impact to the fourth calendar quarter of 2012.”

Wells Fargo changed price estimates of the firms to:

SAIC, price target cut from $13-$14 to $9-$10 . Estimated fiscal year 2014 earnings per share (EPS) cut to $1.17 from $1.29.

CACI International, price target cut from $54-$57 to $45-$47. Fiscal year 2013 EPS estimate cut from $6.40 to $6.04.

Booz Allen Hamilton, target price cut from $12-$13 to $10-$11. Fiscal year 2014 EPS target to $1.32 from $1.50.

NCI Inc., price target cut $7-$8 to $4-$5 per share. Full year 2013 EPS cut to 16 cents from 18 cents.

ManTech International was cut from $20-$22 to $19-$21. Full-year EPS cut to $2.51 from $2.80.

ICF International’s price target was cut to $21-$23 from $16.$18 per share. EPS estimates were cut to $1.81 from $1.90.


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