Assuming that the $46 billion in annual defense cuts mandated under the government's "sequestration" will be proportional and remains in force, it is estimated that up to another 12 percent, or $25 billion, of defense and government contractor budgets "are likely to be impacted for a combined total of approximately 24 percent in reductions."
"With U.S. defense budgets being cut, defense contractors are likely to experience continued revenue declines, and in some cases accelerated revenue declines," said Tom Captain, vice chairman, Deloitte LLP and aerospace and defense sector leader. "It's expected that U.S. defense contractors will aggressively address this revenue shortfall with foreign military sales, acquisitions, new product introductions and growth in adjacent markets."
Deloitte said that while defense sector business dropped last year, the commercial aerospace sector continued double-digit growth. Its revenues grew by 18.3 percent and earnings jumped 13.2 percent.
"Overall, the top 20 U.S. A&D companies' revenues increased 5.5 percent to $354.7 billion, primarily driven by record-setting commercial aircraft production, which offset the negative revenue decline within the defense sub-sector," it said. "Overall operating earnings decreased 2.2 percent to $36.0 billion due to the impact of slowing defense spending."