By Katherine Hamilton

Government contractors are having a hard time forecasting their business as the Trump administration reexamines which companies it spends its money on.

Companies, such as Parsons and ICF International, that make money from government contracts are grappling with uncertainty about how much the U.S. will continue to do business with them. Analysts say the process of signing and renewing contracts has slowed because of Department of Government Efficiency reviews and a planned reorganization of the State Department, casting doubt on contractors' financial futures.

"There's a lot of change going on, and that means there will be winners and losers," Benchmark analyst Josh Sullivan said. "It's hard to say who the winners and losers are going to be."

The federal government was initially directing its efficiency efforts toward consulting companies such as Booz Allen Hamilton and Deloitte.

Now it is turning toward contractors that provide technology services. The Trump administration sent a letter in late May to a handful of technology contractors asking executives to justify their work and find areas to cut.

The uncertainty is causing jitters among investors.

Shares of technology contractors Science Applications International Corporation and CACI International fell 10% in the past five days, while IT provider CDW has declined 3%. They, along with Parsons and ICF International, are still recovering from sharp drops following the November election.

Parsons, an engineering firm, cut its full-year outlook on Monday to remove the expected revenue from a contract with the State Department. Shares rose the following day, as investors were relieved to see the uncertainty quantified, Truist analyst Tobey Sommer said.

Other companies have kept investors on edge because they are less inclined to cut contracts out of their guidance completely. The hope is that funds will start flowing in the fall, once the administration's budget passes, Sullivan said.

"They just kind of hope for the best and wait," he said.

ICF Chief Executive John Wasson said in early May he expects sales in its information-technology modernization business to decline 5% to 10% this year because of the government's shakeup. The consulting and technology provider pinned its lower sales outlook on the slower pace of contract negotiations, citing DOGE's review process.

The company so far has received termination of convenience notices for contracts valued at $375 million, and expects DOGE's work will affect finances over the next two quarters, Wasson said.

"The environment in the federal arena remains fluid and unsettled," he said.

Write to Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

June 04, 2025 16:01 ET (20:01 GMT)

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