Important Contract Announcements Of Last Week

Includes: FTI, IBM, ICFI, LDOS
by: The Value Investor

Many businesses sell their products and services gradually during the year to a wide range of customers. Some businesses and industries are highly reliant on individual contracts placed by large corporate or government customers. Especially companies operating in project management, the energy business, the aviation business or defense business often announce large one-time contract awards which can significantly move their share prices.

The following are the most important contract announcements for the week of July 2nd till July 6th.

SAIC (SAI) the provider of engineering and technical services for the defense, infrastructure and energy industries announced that it was awarded a contract by the US Space and Naval Warfare Systems Center to provide infrastructure protection solutions for the organization. The one year contract which includes four more one-year options will have a total contract value of $228 million if all options will be exercised. Investors were not impressed with the award as the total potential value of the 5-year contract only makes up 2% of 2011's annual revenues of $10.6 billion. Shares of SAIC ended the week 2% lower, marking year to date losses of 5% amidst worries about automatic spending cuts impacting defense spending.

FMC Technologies (FTI) the manufacturer and servicer of equipment systems announced a $200 million deal with Norwegian oil company Statoil. FMC will manufacture subsea production equipment for Statoil's Gullfaks South field in the North Sea. Delivery of the equipment is expected to begin in the second quarter of 2013. The contract represents roughly 4% of FMC's 2011's annual revenues of $5.1 billion. Shares of FMC Technologies rose almost 5% on the week, still trading around 22% below the level of January 1st as investors are worried that major energy companies will cut their capital expenditure budgets amidst falling oil and natural gas prices.

ICF International (ICFI) the provider of management, technology and consulting services for the energy, environment and transportation industry announced two contract awards over the past week. The company got a $13.5 million contract awarded from an unidentified utility company to support the energy efficiency of its operations in the coming 30 months. Furthermore it announced a $12 million re-compete contract award from the Environmental Protection Agency (EPA) to provide initiatives under the Clean Air Act. This contract has a base term of one year with options of a four year extension. Combined the contracts represent roughly 3% of ICF's 2011's annual revenues of $840 million. Shares of ICF International rallied 7% over the past week on the back of the contract awards, trading flat so far for 2012.

International Business Machines (IBM) the global information technology company announced that it entered into a five year strategic agreement with Sandvik AB, the Swedish engineering group. Sandvik will outsource parts of its IT infrastructure in a deal valued at 2 billion SEK, roughly $285 million. IBM will consolidate the company's data services including servers, software and workplace systems. The five year contract which only represents 0.3% of IBM's annual revenues of $107 billion hardly makes a dent in the prospects for IBM. Shares of IBM ended the week 1% lower, marking year to date gains of 4%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.