As the Q1 earnings season wraps, let's dig into this quarter's best and worst performers in the defense contractors industry, including CACI (NYSE:CACI) and its peers.
Defense contractors typically require technical expertise and government clearance. Companies in this sector can also enjoy long-term contracts with government bodies, leading to more predictable revenues. Combined, these factors create high barriers to entry and can lead to limited competition. Lately, geopolitical tensions–whether it be Russia’s invasion of Ukraine or China’s aggression towards Taiwan–highlight the need for defense spending. On the other hand, demand for these products can ebb and flow with defense budgets and even who is president, as different administrations can have vastly different ideas of how to allocate federal funds.
The 13 defense contractors stocks we track reported a strong Q1; on average, revenues beat analyst consensus estimates by 3.5%. while next quarter's revenue guidance was 0.7% above consensus. Inflation progressed towards the Fed's 2% goal at the end of 2023, leading to strong stock market performance. The start of 2024 has been a bumpier ride, as the market switches between optimism and pessimism around rate cuts due to mixed inflation data, and defense contractors stocks have held roughly steady amidst all this, with share prices up 1% on average since the previous earnings results.
CACI (NYSE:CACI) Founded to commercialize SIMSCRIPT, CACI International (NYSE:CACI) offers defense, intelligence, and IT solutions to support national security and government transformation efforts.
CACI reported revenues of $1.94 billion, up 11.1% year on year, exceeding analysts' expectations by 4.4%. Overall, it was a very good quarter for the company with an impressive beat of analysts' backlog sales estimates and full-year revenue guidance exceeding analysts' expectations.
“CACI’s outstanding performance reflects the continued successful execution of our strategy. We’re winning and delivering in the marketplace with differentiated capabilities, exceptional business development, and program execution,” said John Mengucci, CACI President and Chief Executive Officer.
CACI scored the highest full-year guidance raise of the whole group. The stock is up 15.6% since reporting and currently trades at $439.23.
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Best Q1: Northrop Grumman (NYSE:NOC) Responsible for the development of the first stealth bomber, Northrop Grumman (NYSE:NOC) specializes in providing aerospace, defense, and security solutions for various industry applications.
Northrop Grumman reported revenues of $10.13 billion, up 8.9% year on year, outperforming analysts' expectations by 3.8%. It was a stunning quarter for the company with an impressive beat of analysts' organic revenue estimates and a decent beat of analysts' earnings estimates.
Although it had a great quarter compared its peers, the market seems unhappy with the results as the stock is down 8.3% since reporting. It currently trades at $435.13.
Weakest Q1: Mercury Systems (NASDAQ:MRCY) Founded in 1981, Mercury Systems (NASDAQ:MRCY) specializes in providing processing subsystems and components for primarily defense applications.
Mercury Systems reported revenues of $208.3 million, down 21% year on year, falling short of analysts' expectations by 2.9%. It was a weak quarter for the company with a miss of analysts' earnings and organic revenue estimates.
Mercury Systems posted the weakest performance against analyst estimates and slowest revenue growth in the group. Interestingly, the stock is up 7.1% since the results and currently trades at $31.18.
Lockheed Martin (NYSE:NYSE:LMT) Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE:LMT) specializes in defense, space, homeland security, and information technology products.
Lockheed Martin reported revenues of $17.2 billion, up 13.7% year on year, surpassing analysts' expectations by 7.5%. Zooming out, it was a stunning quarter for the company with an impressive beat of analysts' organic revenue estimates and a decent beat of analysts' earnings estimates.
The stock is up 1.5% since reporting and currently trades at $468.59.
Kratos (NASDAQ:KTOS) Established with a commitment to supporting national security, Kratos (NASDAQGS:KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.
Kratos reported revenues of $277.2 million, up 19.6% year on year, surpassing analysts' expectations by 10.7%. Revenue aside, it was a very strong quarter for the company with an impressive beat of analysts' earnings estimates.
Kratos delivered the biggest analyst estimates beat and fastest revenue growth among its peers. The stock is up 12.6% since reporting and currently trades at $21.15.
This content was originally published on Stock Story
