Contractors will see 2.5 percent drop in quarterly revenue, research firm says

Contractors won't be able to make up revenue lost due to snow storms that shut the federal government for four days. Jacquelyn Martin/AP

Some federal technology contractors will see an average 2.5 percent revenue reduction this quarter as a result of last week's four-day government closure, according to data from BB&T Capital Markets Inc.

The investment research firm on Tuesday revised its March quarter revenue estimates for 11 companies with significant operations in the Washington metro area. Major snowstorms shut down federal agencies from Feb. 8 through Feb. 11 and forced the Office of Personnel Management to implement delayed arrival and unscheduled leave policies for days after.

Each company is affected differently, said Michael Lewis, an analyst for BB&T's defense and government services equity research division, adding the estimates take into account the proportion of employees located in the District of Columbia area and the contract base. For example, the firm changed revenue numbers for Stanley Inc. by just 1 percent because the majority of the company's employees aren't based in the mid-Atlantic.

In some cases, Lewis said, contractors won't be able to make up the work missed and revenue lost.

"The biggest risk is that agencies won't allow you [the contractor] to catch up," he said. "They now have a bit of a buffer in the budget, extra money in the coffers that can be used later on."

Telework also could affect revenue reductions, said Olga Grkavac, executive vice president for the public sector at TechAmerica. Some government contracts specify that work must be performed on-site, though there could be instances in which telework is an appropriate solution, she added. CACI International Inc., Mantech International Corp., SAIC Inc. and SRA International Inc. will see a revenue reduction around 3 percent. The firm estimates L-3 Communications Holdings Inc. and Applied Signal Technologies Inc. will see a 1 percent reduction, while Argon ST Inc. will lose about 2 percent.

"On a quarter-to-quarter basis, this could be the difference in meeting or exceeding expectations," Lewis said. "We prefer companies to meet or exceed, which is why we had to pull back our expectations."