Executive Mosaic’s GovCon Index stumbled to negative late afternoon Thursday on a plunge in McKesson Corp. (NYSE: MCK) with other health stock declines despite an upgrade to L-3 Communications (NYSE: LLL) by JPMorgan and gains by other defense primes and government services providers.
GovCon Index gainers outnumbered laggers by roughly 2-to-1 ratio and eight of the GCI’s 11 S&P 500-listed companies advanced with L-3 the top net gainer and McKesson the largest net and percentage lagger for stocks included in both indices.
Pharmaceutical supply services company McKesson had 2.37 million shares traded to nearly double the three-month average volume as the S&P sector fell more than 1 percent on continued controversy over Mylan’s move to raise the price of its Epipen allergy medication.
L-3 is now JPMorgan’s new top pick in the defense sector as the firm lifted the New York City-based defense contractor to “Overweight” from “Neutral” with a higher price target of $182 from $158 in a research note to investors.
JPMorgan analyst Seth Seifman told investors he expects L-3 to generate 5-percent compound annual growth in free cash flow through 2020 to become the second-highest level of defense stocks covered by the financial services firm.
L-3 should also see 2-percent annual organic growth and achieve at least one additional percentage point of margin through 2018, Seifman said.
Seifman also downgraded Northrop Grumman‘s (NYSE: NOC) stock from “Overweight” to “Neutral” on cash return yield he believes as no longer exceptional but also raised the price target from $225 to $231.
Seifman remains upbeat on defense and expects the average defense stock to gain 10 percent over the next 16 months as that sector is attractive to investors with companies that have “robust, visible cash flows and… commitment to returning that cash.”
ManTech International (Nasdaq: MANT) and Science Applications International Corp. (NYSE: SAIC) hit 52-week highs during intraday trade Thursday.
The S&P 500 has closed at a gain or loss of less than 1 percent for 33 straight days with Thursday the final trading day before Federal Reserve Chair Janet Yellen speaks Friday morning in Jackson Hole, Wyoming.
Market Summary
| Index | Value | Net Change | % Change |
|---|---|---|---|
| GovCon Index | 81.564 | -0.039 | -0.048% |
| S&P 500 | 2, 172.47 | -2.97 | -0.14% |
| Dow Jones Industrial Average | 18, 448.81 | -33.07 | -0.18% |
| NASDAQ | 5, 212.20 | -5.49 | -0.11% |
| Advancing GovCon Index Issues | 22 |
| Declining GovCon Index Issues | 7 |
| Unchanged GovCon Index Issues | 1 |
Lowest GovCon Index Net Performers
| Symbol | Company | $ Current Price | Net Change –¾ | % Change |
|---|---|---|---|---|
| MCK | McKesson Corp. * | 183.30 | -5.75 | -3.04% |
| OA | Orbital ATK | 75.20 | -0.85 | -1.12% |
| COL | Rockwell Collins | 84.43 | -0.37 | -0.44% |
| LDOS | Leidos Holdings | 39.70 | -0.32 | -0.80% |
| BA | Boeing * | 132.98 | -0.31 | -0.23% |
Lowest GovCon Index Percentage Performers
| Symbol | Company | $ Current Price | Net Change | % Change –¾ |
|---|---|---|---|---|
| MCK | McKesson Corp. * | 183.30 | -5.75 | -3.04% |
| OA | Orbital ATK | 75.20 | -0.85 | -1.12% |
| LDOS | Leidos Holdings | 39.70 | -0.32 | -0.80% |
| BAESY | BAE Systems | 27.82 | -0.18 | -0.64% |
| COL | Rockwell Collins | 84.43 | -0.37 | -0.44% |
Top GovCon Index Net Gainers
| Symbol | Company | $ Current Price | Net Change –´ | % Change |
|---|---|---|---|---|
| LLL | L-3 Communications * | 148.38 | +1.60 | +1.09% |
| CACI | CACI International | 98.56 | +1.07 | +1.10% |
| RTN | Raytheon * | 141.78 | +0.71 | +0.50% |
| ICFI | ICF International | 41.85 | +0.42 | +1.01% |
| LMT | Lockheed Martin * | 248.53 | +0.41 | +0.17% |
Top GovCon Index Percentage Gainers
| Symbol | Company | $ Current Price | Net Change | % Change –´ |
|---|---|---|---|---|
| I | Intelsat | 3.10 | +0.21 | +7.27% |
| CACI | CACI International | 98.56 | +1.07 | +1.10% |
| LLL | L-3 Communications * | 148.38 | +1.60 | +1.09% |
| ICFI | ICF International | 41.85 | +0.42 | +1.01% |
| VEC | Vectrus | 33.00 | +0.29 | +0.89% |
