DOGE is an Opportunity

Boeing Is Winning Again

The wins are adding up for the United States’ largest airplane maker. Last Friday, Boeing (BA) won a contract to design and build the United States’ next generation stealth fighter jet, beating out Lockheed Martin Corp. (LMT) for an estimated $20 billion dollar program. The R&D portion of the contract will be cost-plus, meaning cost overruns will be paid by the government, not Boeing (BA). In a press briefing on the matter, Donald Trump stated, “this will ensure that the USA continues to dominate the skies”. This new jet is dubbed the F-47 and will replace the F-22 Raptor. This is a huge win for Boeing, who lost the F-35 fighter program to Lockheed Martin Corp. (LMT) in 2001. Now, Boeing is ensuring that it will maintain its role as a designer and producer of military fighter planes.

Chart 1: Mockup of the Boeing F-47^[1]

Winning the contract for the next generation stealth fighter jet is not all Boeing has been up to. Over the past two weeks, they have also reported better than expected delivery figures for the month of February, and they have updated investors on some positive trend changes happening at the company.

So far, Boeing (BA) has delivered 45 planes in January and 44 planes in February, 89 total.^[2] This has outpaced rival, Airbus (AIR), as they have only delivered 65 planes in 2025.^[3] We view this as a great response for Boeing (BA) as they continue to scale up their manufacturing to prior levels; more production will equal better free cash flow. Boeing (BA) is targeting to produce the 737 planes at a rate of 38 per month and the 787 at seven per month with hopes of expanding this production later in the year. Separately, Brian West, the current CFO of Boeing (BA), presented at an investor conference about how Boeing’s (BA) cash burn is easing this quarter and its factories are improving to deliver more planes this year.^[4] We have mentioned a few times that Boeing(BA) remains one of our top ideas – we think they are ready to turn the corner under the new leadership of Kelly Ortberg. Combining this optimism with their ability to win new contracts for the next generation fighter jets. We think there is an opportunity for them to play a bigger role with the United States Government.

Government Contracting Fears are Overblown

Government contractors’ stocks have suffered since the Trump victory back in November. Businesses that have a large revenue exposure to the United States government have feared spending cuts due to policies and rhetoric that have come out during the current presidential administration.  The poor performance is evident when looking at the Bank of America Government Contractors basket. Since Trump’s win on November 5^th, this basket that features companies with material U.S. government revenue exposures is down over -8.6%; meanwhile, the S&P 500 is nearly flat during the same period.^[5]

Chart 1: S&P 500 (SPX) vs. Bank of American Government Contract Basket (MLGOVCON) Performance

Specifically, the Department of Government Efficiency, also known as DOGE, is the main source of the poor performance from the government contractor stocks. DOGE was implemented via executive order on January 20^th of this year. According to the White House’s website, its main purpose is to “implement the President’s DOGE agenda by modernizing federal technology and software to maximize governmental efficiency and productivity.”^[6] So far, DOGE is in the process of reducing the workforce across numerous federal agencies, such as cutting 50% of the staff at the Department of Education, cutting 55,000 employees at the Department of Defense, and 80,000 employees at the Department of Veteran Affairs.

There have been mixed results when it comes to the success of these reductions in force. For example, DOGE has been in the process of deconstructing USAID, but the Supreme Court has ruled that Trump must disburse money for foreign aid that has already been completed. Also, a lower court claimed that the current administration cannot fire 30,000 USAID workers due to them being on probation.^[7]

Despite the confusing status of ongoing DOGE initiatives, government contracting stocks have seen little improvement. Although most of the market sees the potential government cuts as a headwind, many management teams view DOGE as an opportunity. Certain government contractors and IT service providers specialize in bringing costs down and driving efficiency, which aligns with the greater goals of DOGE. Accenture PLC (ACN), a consulting firm that receives 8% of their total revenue from the government, mentioned during their call that “based on our significant experience across federal and commercial clients, we see major opportunities over time for us to help consolidate, modernize, and reinvent the federal government to drive a whole new level of efficiency.”^[8]

This discussion took attention away from the good parts of their earnings report, which featured $600+ million in generative AI momentum, which is up +20% sequentially from last quarter and has a 2.2x book-to-bill ratio.^[9] Accenture (ACN) also showed momentum in other verticals: Financial Services +11%, Managed Services +11%, Health & Public Services +10%, and Communications & Media +6%. Accenture (ACN) is known for being a resource for companies and governments that want to implement new technologies, simplify old technologies, and explore options. We think this ability can separate them from peers and give them an opportunity to help the US government with technological efficiency.

Lockheed Martin Corp. (LMT), a traditional US defense contractor, had similar thoughts when it came to DOGE cuts. The company said at a recent industry conference that “DOGE presents an opportunity from a, what I would refer to as addition by subtraction. If they cut costs in certain areas, I’ll call it on the entire budget that presents an opportunity to put some of those monies back into defense.”^[10]

Not only is DOGE going to provide an opportunity for government contractors to directly assist with efficiencies, but the department has also been eliminating red tape. It traditionally has been costly and time-consuming for contractors to communicate with the U.S. government and prepare bids for contracts. But it seems that there has been positive progress when it comes to reducing some of the administrative burdens here. In a recent management meeting that Investment Solutions had with Leidos Holdings Inc. (LDOS), the company highlighted the ease in which they have been able to meet and communicate with this presidential administration in comparison to previous ones.^[11] LDOS’ core competencies include IT modernization, transformational warfighting capabilities, and increased privatization.

Overall, the DOGE headlines need to be considered in the short term but may prove to be a solid opportunity in the medium-to-long term. The reduction of bureaucracy and need for improved efficiencies provide an opportunity for many companies with material government revenue exposure.

Stephanie Link’s TV Schedule:

^[1] Source: DARPA. As of March 21, 2025.

^[2] Source: Boeing.com. As of March 11, 2025.

^[3] Source: Airbus.com. As of March 13, 2025.

^[4] Source: NBC.com. As of March 19, 2025.

^[5] Source: Bloomberg. As of March 24, 2025. 

^[6] Source: Whitehouse.gov. As of January 20,2025.

^[7] Source: Kiplinger. As of March 23, 2025.

^[8] Source: Accenture. As of March 20, 2025.

^[9] Source: Accenture.com. As of March 21, 2025

^[10] Source: Lockheed Martin. As of February 13, 2025.

^[11] Source: Leidos Management Meeting with Investment Solutions. As of March 12, 2025.

Disclosures

Investment Solutions is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors. All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Investment Solutions and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Investment Solutions and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.