Government spending cuts have mostly hit smaller support contracts so far, sparing crucial defense and nuclear initiatives. 

Amentum (AMTM) stands out with a diversified portfolio of high-stakes, long-duration government projects across defense, nuclear, and space. 

Its $45 billion backlog and multinational presence provide stability and shield it from near-term cuts. 

Despite strong performance and healthy returns, the market remains cautious about future government spending.

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Government spending cuts are in the spotlight as the Department of Government Efficiency (DOGE), led by Elon Musk, takes aim at a variety of contracts. 

While the average cost savings per canceled contract sits around $7.7 million, questions linger about how close these efforts are to meeting the administration’s trillion-dollar target. 

Most of the terminated contracts so far involve modest support services rather than the larger projects that anchor U.S. national security and energy goals.

Defense and technology sectors may see some turbulence, but not every contractor will feel the squeeze. 

Nuclear especially, appears shielded from harsh cuts, given its significance for power generation and strategic defense interests. 

America’s reliance on safe, stable nuclear solutions continues to grow, meaning high-level projects in this field are likely to stay funded.

Amentum (AMTM) has quickly become one of the largest players in government services, a position it strengthened after merging with Jacobs’ Critical Mission Solutions business.

The company’s business revolves around high-stakes government projects with multiyear lifespans. 

Its $45 billion contract backlog includes essential work such as environmental cleanup at Washington’s Hanford nuclear site, hypersonic weapons development for the UK Ministry of Defence, and maintenance of the U.S. Army’s fixed-wing aircraft fleet. 

These contracts span defense, energy, and infrastructure sectors where spending is often insulated from short-term budget fluctuations.

Notably, the company avoids speculative R&D or reactor design, instead concentrating on execution-critical services like nuclear waste remediation, drone defense systems, and cybersecurity. 

For example, Amentum supports the Department of Homeland Security’s border protection efforts through drone detection contracts and maintains aircraft for Customs and Border Patrol. 

While Amentum’s revenue is heavily government-dependent, its work spans multiple agencies and international allies. 

The company manages sensitive operations for NASA, including launch support for the Artemis program, while also securing commercial contracts in 5G deployment and clean energy. 

This diversification, combined with multiyear contracts, provides revenue stability. 

Roughly 60% of its contracts are cost-plus, ensuring predictable margins, while a growing shift toward fixed-price agreements could boost profitability as the company demonstrates execution efficiency.

Geographically, Amentum’s presence in the U.S., U.K., and Australia further buffers against localized economic or political disruptions. 

Its $1.25 billion hypersonic development contract under the AUKUS partnership is a great example of its role in multinational security projects.

All these factors combined enabled the company to achieve a 30% Uniform return on assets ”ROA” and 68% asset growth last year.

Despite this performance, it trades at a below average 13x Uniform P/E, reflecting concerns about changing government spending priorities.

We can see what the market thinks through our Embedded Expectations Analysis (“EEA”) framework.

The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.

In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.

At the current stock price, the market expects the company’s Uniform ROA to decline to 16% from 30% last year.