Compound growth

As U.S. stocks hit bear market territory last year, Virginia’s largest publicly traded companies weathered rising interest rates, inflation and continued supply chain and labor challenges.

Rising home mortgage rates drove a slowdown in new business at McLean-based Freddie Mac. Plunging prices for used cars caused Goochland County-based CarMax to focus on controlling costs.

As inflation hit American households hard in 2022, Chesapeake-based Dollar Tree Inc. and other discount retailers saw an increase in business, especially from shoppers moving their food purchases away from grocery stores to lower their bills.

Amid these changing fortunes, Virginia’s profile as a home state for corporate headquarters was buoyed by the relocation of two large Fortune 500 firms — Boeing and Raytheon Technologies — to Arlington County.

As a result of these moves, four of the world’s top five defense contractors are now based in the Old Dominion, with the largest contractor, Lockheed Martin Corp., headquartered in nearby Bethesda, Maryland.

Jerry McGinn, executive director of the Center for Government Contracting at George Mason University’s School of Business, says the concentration of government contractors not only in the suburbs of Washington, D.C., but specifically on the Virginia side of the Potomac, speaks well of the commonwealth’s reputation.

“It reflects well on the business environment here that they would come here as opposed to the District or Maryland,” he says. “Virginia has been a very attractive state for business, and I think this is another reason the companies ended up here.”

At a time when consumer-focused businesses are extremely volatile, defense contractors have a level of stability that doesn’t exist in many other parts of the economy, he says. One indicator is the federal defense budget. Passed at the end of 2022, it was $45 billion larger than the Biden administration’s original request.

“It’s a dangerous world. That was made very clear last February when Russia invaded Ukraine, and those events have put a brighter light on Asia and the rise of China,” McGinn said. “The margins are not as high in the aerospace and defense world, but the stability and cash flow is much more predictable.”

Here’s a look at how Virginia’s 10 most profitable publicly traded companies fared during the past year:

Federal Home Loan Mortgage Corp. (“Freddie Mac”) McLean

2021 revenue: $68.7 billion

Employees: 7,300

As mortgage rates climbed during much of 2022, Freddie Mac saw new business slow in both its single-family and multifamily divisions, according to company earnings reports.

The government-sponsored enterprise’s own research shows that in the fourth quarter of 2022, confidence in the nation’s housing market fell significantly, with only 34% of respondents reporting optimism that the housing market will remain strong in 2023. The report also found that 57% of consumers — renters and owners — were concerned about making housing payments, reflecting nationwide concerns about affordability and equity in housing.

Freddie Mac in June 2022 released its first-ever Equitable Housing Finance Plan. The plan was created in response to a 2021 request by the Federal Housing Finance Agency. It calls for expanding access to capital for diverse multifamily housing developers, investigating the use of the Special Purpose Credit Program framework to deliver mortgage funding to underserved communities and fixing disparities in credit scoring, underwriting and appraisals, among other initiatives. Freddie Mac plans to implement the plan during the next two years.

Raytheon Technologies Corp. Arlington County

2021 revenue: $64.4 billion

Employees: 182,000+

In July 2022, Raytheon Technologies moved its corporate headquarters from Massachusetts to Arlington County’s Rosslyn neighborhood, making it the last of the Big Five defense contractors to locate in a suburb of Washington, D.C. The aerospace and defense company formed in 2020, when Raytheon Co. merged with aerospace business United Technologies Corp. The company is made up of four subsidiaries — Collins Aerospace; Pratt & Whitney; Raytheon Intelligence & Space; and Raytheon Missiles & Defense.

In December 2022, Pratt & Whitney received $75 million in the federal appropriations bill toward its modernization of the engine that powers the F-35 Lightning II fighter jets. In January, Raytheon Intelligence & Space was named prime contractor on the development of a missile tracking system for the U.S. Space Force. In September 2022, Raytheon Missiles and Defense received the go-ahead from the Air Force to move beyond the prototype phase and continue development of a new hypersonic cruise missile weapon under a nearly $1 billion contract.

Boeing Co. Arlington County

2021 revenue: $62.3 billion

Employees: 140,000+

Boeing’s announcement in May 2022 that it would move its global headquarters from Chicago to Arlington added the world’s third largest defense contractor to Virginia’s growing stable of aerospace and defense companies.

While the move did not come with significant job relocations, Boeing plans to develop a research and technology hub in the region that will focus on cybersecurity, autonomous operations, quantum sciences, and software and systems engineering.

Boeing also is partnering with the University of Virginia and Virginia Tech on developing hypersonic jet engines through U.Va.’s Aerospace Research Laboratory.

Along with Airbus, Boeing is one of the two largest commercial plane manufacturers in the world, and its 2022 commercial jet business continued to show a slow recovery from the pandemic’s impact on airlines and the grounding of its 737 MAX jets from March 2019 to November 2020 following two deadly crashes.

Boeing delivered 480 jets in 2022, notably including the last of its iconic 747 jumbo jets. In January, Boeing’s 747 No. 1,574 left the factory in Everett, Washington, drawing a close to the company’s 55-year history of manufacturing the wide-body airliners.

The last few months have seen Boeing ink some major deals, including a December 2022 order from United Airlines for 100 787 Dreamliner jets that’s expected to be worth $25 billion. Additionally, in February, Air India reached a $45.9 billion deal to purchase jets from Boeing — the company’s third biggest sale ever.

Boeing also made big changes to its Defense, Space and Security business last year when Ted Colbert was named president and CEO of the defense unit. Colbert had previously served as CEO of Boeing Global Services and was succeeded in that position by Stephanie Pope. Under Colbert’s leadership, the defense unit in November 2022 announced a major reorganization in response to recent delays in key programs, and significant quarterly losses — including a loss of $1.1 billion on a deal Boeing made with the Trump administration to modify two 747s to serve as Air Force One.

General Dynamics Corp. Reston

2021 revenue: $38.5 billion

Employees: 100,000+

The Pentagon awarded the Reston-based defense contractor a $5.1 billion contract modification for the Columbia-class ballistic-missile submarine program in December 2022. Work on this contract will be performed in Connecticut, Newport News and Rhode Island and is expected to be completed by June 2028.

As a visible sign of progress on the Columbia-class submarine program, in June 2022 General Dynamics’ Electric Boat subsidiary joined with the U.S. Navy to celebrate the ceremonial keel-laying for the USS District of Columbia — the lead boat in this class, intended to play a major role in the U.S. military’s nuclear deterrence efforts.

Meanwhile, subsidiary General Dynamics Information Technology Inc. (GDIT) landed a $65 million contract last year to support an integrated data repository for Centers for Medicare and Medicaid Services’ Enterprise Architecture Data Group. GDIT also was awarded an $84 million contract from the Defense Health Agency to continue helping staff at the Traumatic Brain Injury Center of Excellence with congressionally mandated projects, including the Warfighter Brain Health Program and a 15-year study of brain injuries sustained in the Afghanistan and Iraq wars. GDIT has been involved in the study since 2014.

Northrop Grumman Corp. Falls Church

2021 revenue: $35.7 billion

Employees: 90,000+

NASA’s November 2022 launch of its Artemis I unmanned moon orbit mission was powered in part by two five-segment solid rocket boosters manufactured by the Falls Church-based Fortune 500 aerospace and defense contractor. Northrop Grumman is supporting several stages of NASA’s Artemis program, which is focused on deep space exploration and establishing a sustainable human presence on the moon.

Also supporting the Artemis I launch were two of Northrop’s RQ-4 RangeHawk unmanned aircraft, which were positioned to help track the Artemis I rocket as it exited the Earth’s atmosphere during a window when it was not visible to NASA ground stations.

In December 2022, Northrup Grumman and the U.S. Air Force also unveiled the
B-21 Raider, a stealth bomber expected to take a premier spot in the U.S. fleet. “The B-21 Raider defines a new era in technology and strengthens America’s role of delivering peace through deterrence,” Northrop Grumman Chair, CEO and President Kathy Warden said at the unveiling ceremony.

Capital One Financial Corp.  McLean

2021 revenue: $32 billion

Employees: 51,000+

The sixth largest bank in the U.S. based on consumer deposits, Capital One officially reopened its corporate offices in September 2022, following many delays due to the pandemic. Its McLean headquarters is running on what the company calls an “initial hybrid” model that makes Mondays and Fridays virtual workdays and Tuesdays through Thursdays in-office days. CEO Richard Fairbank noted that Capital One will monitor how the approach works, adjusting as needed.

The bank continues to see strength in its credit card business, and Fairbanks noted in reporting third-quarter earnings that the bank’s long-term focus on luring heavy spenders to its cards — notably the Venture X premium card — is paying off.

“Our decadelong quest to build our heavy spender franchise has brought with it significantly increased levels of marketing, but the sustained revenue, credit, resilience and capital benefits of this enduring franchise are compelling, and they’re growing,” Fairbank said on the call.

In January, Capital One renamed the startup incubator it runs in downtown Richmond in honor of the late Michael Wassmer, a longtime Capital One executive and Richmond resident who served most recently as the bank’s Central Virginia market president. Wassmer died unexpectedly in June 2022 at age 52.

Performance Food Group Co. Goochland County

2021 revenue: $30.4 billion

Employees: 30,000+

A Goochland-based food services and distribution company, Performance Food Group delivers to more than 300,000 locations, including restaurants, businesses, schools, health care facilities, vending distributors, retailers, theaters and convenience stores. Building on its 2021 acquisition of convenience store supplier Core-Mark Holding Co. Inc., Performance Food announced in September that its entire convenience business would operate under the Core-Mark brand.

“We believe that combining our convenience companies under the powerful Core-Mark brand positions PFG for future success,” President and Chief Operating Officer Craig Hoskins said in announcing the change.

The Core-Mark acquisition proved fruitful for the company, as Holm acknowledged it was a major driver of the 42% increase in net sales reported in its quarterly earnings in November 2022. Inflation also drove its net sales numbers higher.

In August 2022, PFG tapped former Core-Mark President and CEO Scott McPherson to serve as executive vice president and CEO of its convenience division.

Jim Hope, PFG’s executive vice president and chief financial officer, retired at the end of 2022, succeeded by Patrick Hatcher, who had served as chief operating officer and president of Vistar, the company’s vending division.

Less than a month after Russia invaded Ukraine, Performance Food Group announced a $50,000 donation to Washington, D.C.-based nonprofit World Central Kitchen to provide meals to Ukrainian refugees.

Dollar Tree Inc. Chesapeake

2021 revenue: $26.3 billion

Employees: 200,000+

Based in Chesapeake, discount retailer Dollar Tree, which operates more than 16,200 stores under the Dollar Tree and Family Dollar brands, has gone through some big executive changes in the past year, culminating in the Jan. 29 replacement of its CEO.

Rick Dreiling, former chairman and CEO of Dollar Tree rival Dollar General, replaced Mike Witynski, who had been president and CEO since 2020, overseeing a controversial move to raise prices to $1.25 for most items in the Fortune 500 retailer’s dollar stores.

Dollar Tree’s third quarter 2022 sales grew 8.1% year over year to $6.93 billion, but Dollar General’s sales rose 11% to $9.5 billion during the same period.

Dreiling was named Dollar Tree’s executive chairman in March 2022, as part of a settlement with activist investor group Mantle Ridge LP that also saw six other new directors named to the retailer’s board.

Leadership shakeups at the company continued through 2022, with Dollar Tree replacing five C-suite executives and adding more. As part of this transformation, Michael Creedon Jr. was tapped as chief operating officer; Pedro Voyer as chief development officer; Jeffrey Davis as chief financial officer; and Bobby Aflatooni as chief information officer.

Altria Group Inc. Henrico County

2021 revenue: $26.01 billion

Employees: 6,000+

As the U.S. market for traditional cigarettes shrinks, Altria continues to try to build a foothold in smokeless tobacco.

A major step in these efforts came in September 2022, when Altria announced it had exercised its option to be released from a noncompete deal with Juul Labs Inc. The move came four years after Altria bought a 35% stake — then valued at $12.8 billion— in the e-cigarette maker. But Juul’s value plummeted as it became the target
of lawsuits claiming it marketed to teens. By July 2022, Altria valued its stake in Juul at $450 million. Juul agreed to a $1.7 billion legal settlement in late 2022 and, as of January, the company was reportedly seeking to sell the business or establish new partnerships.

In October 2022, Altria announced a $150 million joint venture that will see subsidiary Philip Morris USA and Japan Tobacco Group sell heated tobacco products in the U.S. and worldwide. This could move Altria beyond the roadblocks presented by both the Juul stumble and 2021 action by the International Trade Commission that pulled Marlboro Heat Sticks and IQOS heated tobacco products from U.S. markets due to infringement on patents held by R.J. Reynolds Tobacco Co.

CarMax Inc. Goochland County

2021 revenue: $31.9 billion

Employees: 30,000+

The used car market was battered over the past year by rising interest rates, inflation and supply constraints. This had a major impact on CarMax, the country’s largest used car retailer, leading it to report year-over-year declines in net revenues and sales in its third-quarter 2022 earnings report.

“In the near term, we are prioritizing initiatives that unlock operational efficiencies and create better experiences for our associates and our customers,” President and CEO Bill Nash said. “While we continue to selectively invest in initiatives that have the potential to activate new capabilities, we have slowed the pace of those investments.”

CarMax continues to focus on making it easier to buy a car digitally — including the financing process. In January, it enhanced its financing capabilities by launching a tool that allows customers to be instantly prequalified for financing and learn their financing terms from the beginning of their search for an automobile from CarMax’s nationwide inventory.

In April 2022, CarMax was recognized for the 18th consecutive year as one of Fortune magazine’s 100 Best Companies to Work For. 

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