SAIC Inc., the eighth-largest contractor for the U.S. government, fell the most in nine months after two analysts downgraded the shares.
SAIC, a McLean, Virginia-based provider of engineering and information-technology services, declined 4.1 percent to close at $11.75 in New York, the biggest drop since May 3.
Robert Stallard, a London-based analyst at RBC Capital Markets, downgraded SAIC shares to underperform from sector perform, citing possible automatic budget cuts and greater risk for companies that provide services to the Pentagon.
Joseph Nadol, an analyst at JPMorgan in New York, downgraded the shares to neutral from overweight.
“We are reducing our estimates to reflect both the dimming outlook for organic revenue growth and the additional overhead” the company is taking on as it prepares to split into two companies, Nadol wrote in a note to clients today.
Stallard said he expects “disproportionate spending pressure” to fall on companies like SAIC in the defense services sector.
SAIC depends on the U.S. government for about 90 percent of revenue, according to data compiled by Bloomberg.
Automatic federal budget reductions totaling $1.2 trillion over nine years are set to begin March 1 unless Congress and the White House reach a compromise. They would be split about equally between national security and domestic programs.
The reductions are on top of $487 billion in defense cuts already planned over a decade.