Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:
Summary: Shares of Friday's celebrated IPO, SAIC Inc., Boeing Co.'s partner in creating new combat vehicles for the U.S. Army, soared as much as 21 percent. The offering sold 75M shares (19% of its stock) at a price of $15, raising $1.13B, and valuing the entire company at over $6B. Founded in 1969, SAIC has $7.8B in annual sales; it says it will used the funds for expansion and acquisitions in a environment of surging defense spending. SAIC has about 9,000 active contracts, including the $2.7B joint venture with Boeing on the U.S. Army's Future Combat Systems. The project, which includes a series of manned and unmanned battle vehicles, is the second largest U.S. defense program. In June SAIC won part of a U.S. Homeland Security Dept. computer services contract worth up to $45B over seven years. 89% of current revenues are from the government. Profits more than doubled to $927M last year. The company has a contract backlog of $16B. It expects to see at least 10% growth in its intelligence, national security, and logistics units over the next 3-5 years. Paul Nisbet of JSA Research: "The war on terror has almost doubled our defense spending and it doesn't look like it's going down in 2008, it's definitely not going down in 2007... Lockheed Martin, General Dynamics and Northrop Grumman are heavily in that market and doing very well. There's no reason it wouldn't be the same for SAIC." Shares Friday traded as high as $18.34, and settled at $18.18.
Related links: Jim Cramer's Mad Money Stock Picks, Oct. 13 (SAIC is "good to go") • Jim Cramer's Mad Money In-Depth Stock Picks, Oct. 9 (A great way to play the "military industrial complex" since 89% of its revenue is generated from the government... predicts that it will go to $20.)
Potentially impacted stocks and ETFs: Defence stocks: Lockheed Martin Corp. (NYSE:LMT), Northrop Grumman Corp. (NYSE:NOC), General Dynamics Corp. (NYSE:GD), Armor Holdings Inc. (AH), Boeing Co. (NYSE:BA), Orbital Sciences Corp. (ORB) • ETFs: PowerShares Aerospace & Defense (NYSE:PPA)
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