BUY OR SELL-Will policy shifts hurt or help DynCorp?

*Bear says Iraq troop withdrawal to constrain growth

*Bull cites possibility of contract wins

By Karen Jacobs

ATLANTA, Nov 16 (Reuters) - Could DynCorp International Inc DCP.N see growth stall over the coming months from expected changes in U.S. defense policies?

Shares of the military contractor, which maintains aircraft and provides security and training, dining facilities and other logistics services for defense, have been downgraded this month by at least two analysts, who have raised concern that the U.S. troop withdrawal from Iraq will hurt growth.

RECENT 'SELL'

Goldman Sachs lowered DynCorp to "sell" from "neutral" on Nov. 13. It said the company garners about 60 percent of its revenue from Middle East operations.

"We estimate the breakup is approximately 40 percent Iraq, 20 percent Afghanistan, and therefore while there may be some benefit from an increased focus on Afghanistan, we believe it will greatly outweighed by the withdrawal from Iraq," Goldman Sachs analyst Noah Poponak said in a note to clients.

Standard & Poor's Equity defense analyst Richard Tortoriello cut DynCorp to "hold" from "buy" on Nov. 5, citing the planned Iraq troop drawdown.

Poponak also said DynCorp could be vulnerable as the U.S. government creates thousands of government positions to perform advisory work that has been done by contractors.

DynCorp "has benefited from the significant increase in outsourcing performed by the (U.S. Defense and State departments) over the past several years, and we believe this Administration is adopting a strategy to reverse that trend and bring back work it believes to be inherently government," Poponak wrote.

CONTRACT WIN COULD HELP

But Tobey Sommer, an analyst with SunTrust Robinson Humphrey who rates DynCorp a "buy," said the coming months could produce positive news--especially tied to Iraq--that will boost earnings and revenue estimates.

"That is based on the following: One, the potential for the company to gain market share in logistics in Iraq," Sommer told Reuters. "There are some significant contracts up for re-compete, only three companies can bid for them and we think DynCorp has a very good chance of winning at least one," Sommer added.

The other two main competitors to DynCorp are KBR Inc (KBR.N) and Fluor Corp (FLR.N).

Sommer said DynCorp would also benefit should the Obama administration boost troop levels in Afghanistan. He noted DynCorp already provides services for troops in the southern part of Afghanistan.

"In addition to that, we think it's likely that the government will send and put a greater emphasis on softer power-type things like police trainers, which the company also provides in Afghanistan," Sommer added.

DynCorp shares fell 6 cents to $16.54 on the New York Stock Exchange on Monday. (Reporting by Karen Jacobs, editing by Leslie Gevirtz)