Revenue in the commercial aerospace sector rose 18 percent in 2012 and earnings rose 13.2 percent for the year as the defense sector is seeing budget cuts under the twin mechanisms of the Budget Control Act and sequestration, a Deloitte study says.
Defense companies’ revenue decreased 1.5 percent and earnings were down 7.4 percent in 2012 but overall revenue for the top 20 U.S. aerospace and defense companies increased 5.5 percent, or $354.7 billion, according to the survey released March 20.
Deloitte says the negative trend in the defense subsector was offset primarily by commercial aircraft production.
“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 of 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,” he said.
For its study, the firm assumed the $46 billion defense spending cut under sequestration will be proportional and remain subsequent congressional actions.