At this point, the federal government’s cybersecurity initiatives get much more attention from the media than products used to facilitate Washington’s efforts in the area of traditional, physical security. Among the systems being utilized to promote the latter initiatives are screening devices, sensors, emergency communications systems, and surveillance apparatus.
Despite the lack of attention being paid to these physical security products, there’s evidence that Washington is spending a great deal of money on them and that the funds devoted to them are likely to increase significantly in the coming years.
As a result, the financial results of the firms that specialize in selling these items could get a meaningful boost in the medium term, significantly lifting their stocks in the process.
DHS Spends a Great Deal on Contracts and Its Budgets Are Increasing
Of course, much of the federal government’s spending on devices that enhance physical security is carried out by the Department of Homeland Security (DHS). That’s because the department is home to many agencies that specialize in physical security, including the U.S. Immigration and Customs Enforcement, the Transportation Security Administration, and the Secret Service.
DHS awarded more than $1 billion in contracts in 2023, and by the last month of fiscal 2024, the value of its total contracts was expected to reach $12 billion.
Meanwhile, in October, DHS submitted to Congress its fiscal 2025 budget request which came in at nearly $108 billion, $4.5 billion above its FY24 request.
The department was seeking to spend significant amounts on areas that could benefit companies which sell physical security solutions. For example, it asked for $127 million for “border security technology and assets between ports of entry” and $90 million for the TSA’s Checkpoint Property Screening System (CPSS) program. The latter initiative includes funding for “current property screening technology.”
Also notably, the FY24 Homeland Security Appropriations Bill developed by Republicans on the House Appropriations Committee, which may foreshadow Washington Republicans’ efforts during the Trump administration, included $276 million for border security technology. The latter amount would have raised funding for the technology to the same level as in FY22. Additionally, the Republicans’ plan included “$305.4 million for additional non-intrusive inspection technology” and “$105.4 million for computed tomography systems to screen carry-on baggage at passenger checkpoints.”
Meanwhile, the TSA was slated on Nov 1 to solicit bids from companies on a $5.5 billion contract related to “security screening services at commercial airports.” Among the services that will be provided by the contract’s winners are “baggage screening, operational supervision and training activities”
Additionally, DHS is supposed to issue $1 billion of contracts for “cutting-edge voice and data transmission technologies.”
Companies That Can Benefit
Teledyne’s (TDY) FLIR unit specializes in providing transportation hubs with “smart thermal and visible imaging systems that monitor traffic flow and detect incidents.” Additionally, it markets “ portable radiation and explosives detectors” to these locations.
Houston’s s George Bush Intercontinental Airport and William P. Hobby Airport, along with San Jose Airport, use FLIR’s cameras.
In addition to providing cameras and explosives detectors to airports and potentially the TSA, Teledyne’s subsidiary has sold border surveillance equipment, including thermal imaging systems and X-ray scanners, to DHS. As a result, the firm is well-positioned to benefit going forward from DHS’ elevated spending on border security, which is likely to increase significantly in the coming years.
Another company, L3 Harris (LHX), provides an array of security systems. Its products provide “visualization tools,” along with “synchronized feeds, tracking and views to all air, land and sea nodes.” Among the use cases for its products are coastal surveillance, perimeter surveillance, port and harbor security, and command and control centers.
Finally, Leidos (LDOS) on Jan. 8 received a contract from TSA that may be worth as much as $2.63 billion. Under the deal, the firm will maintain checkpoint screening equipment at airports and other facilities.
