Here’s What the National Defense Authorization Act Means for Defense Contractors
The past two days have seen the fortunes of defense contractors improve greatly: shares of weapon makers were given a boost on Wednesday as investors expressed relief at the passage of the two-month sequestration delay and the rally continued on Thursday as President Obama’s signing of the $633 billion National Defense Authorization Act will delay pending cuts to Pentagon spending.
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While the bill included controversial provisions regarding the disposition of detainees, which almost caused the president to veto the measure, it also authorized funding for multiyear procurement deals for projects such as Boeing’s (NYSE:BA) CH-47 Army helicopters and General Dynamics’ (NYSE:GD) DDG-51 destroyers. According to the publication Defense News, the total amount approved was $1.7 billion more than the administration’s 2013 Pentagon budget request.
The National Defense Authorization Act clears the Pentagon to spend $633 billion on vehicles, aircraft, and ships, but Congress and President Obama must still agree upon deficit-cutting measures of at least $1.2 trillion before the sequestration delay expires on March 1. “Congress has prevented the worst possible outcome by delaying sequestration for two months. Unfortunately, the cloud of sequestration remains,” Defense Secretary Leon Panetta said in a statement seen by Reuters. “Congress cannot continue to just kick the can down the road.”
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