TD Cowen analyst Gautam Khanna noted in a client communication, “We’ve received numerous inquiries from investors regarding the fundamental risks to government services stocks if the federal budget impasse persists for about a month.” He added, “We view the risk as fairly minor to sales and free cash flow. While Booz Allen Hamilton (BAH) and Science Applications International Corporation (SAIC) face tougher fundamental conditions, we believe their stocks possess greater recovery potential once the end of the shutdown becomes more apparent.”
The analysis from TD Cowen indicates that CACI International, Leidos, and Parsons are entering the shutdown with sufficient funding “buffers” to avoid significant disruptions. Notably, Parsons benefits from its substantial non-U.S. business, which further shields it from the effects of the impasse. Conversely, Booz Allen Hamilton and Science Applications International are seen as more vulnerable. Booz Allen’s ambitious fiscal 2026 guidance and relatively low funded backlog make it more susceptible to immediate cuts if the shutdown extends.
SAIC, while having stronger backlog coverage, is also at risk due to its reliance on civilian agencies and the necessity for new contract wins to meet fiscal 2027 objectives. Despite these challenges, Cowen pointed out that both Booz Allen and SAIC have already experienced significant stock sell-offs over the past month, positioning them for greater recovery potential once a resolution is reached.
Specifically, Booz Allen Hamilton shares have declined by 8% in the past month, while Science Applications International has seen a drop of over 16%. Investors are keenly watching these developments, as the resolution of the shutdown could lead to a rebound in these stocks.
For those interested in learning more about effective strategies for 2026, insights from industry experts like Josh Brown and others can be found at CNBC PRO Live. Tickets and additional information are available for those looking to deepen their understanding of the market dynamics at play during this uncertain period.
