Earnings results often indicate what direction a company will take in the months ahead. With Q2 behind us, let’s have a look at Lockheed Martin (NYSE:LMT) 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 15 defense contractors stocks we track reported a very strong Q2. As a group, revenues beat analysts’ consensus estimates by 4.7% while next quarter’s revenue guidance was 6.7% below.
Inflation progressed towards the Fed’s 2% goal at the end of 2023, leading to strong stock market performance. On the other hand, 2024 has been a bumpier ride as the market switches between optimism and pessimism around rate cuts and inflation. Thankfully, defense contractors stocks have been resilient with share prices up 7% on average since the latest earnings results.
Lockheed Martin (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 $18.12 billion, up 8.6% year on year. This print exceeded analysts’ expectations by 6.5%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ organic revenue estimates and full-year revenue guidance exceeding analysts’ expectations.
"Over the past few months, Lockheed Martin's people, systems, and platforms have again demonstrated their ability to enhance security in Eastern Europe, the Red Sea (NYSE:SE), and the Middle East. From the PAC-3's critical role in air defense, to the Aegis Combat System with AI augmentation, to the F-35 with its advanced sensor and data management capabilities, our company has made major contributions to allied and partner defense." said Lockheed Martin Chairman, President and CEO Jim Taiclet.
Interestingly, the stock is up 19.9% since reporting and currently trades at $569.15.
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Best Q2: 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 $248.6 million, down 1.8% year on year, outperforming analysts’ expectations by 7.8%. The business had an incredible quarter with an impressive beat of analysts’ organic revenue and earnings estimates.
The market seems happy with the results as the stock is up 8.4% since reporting. It currently trades at $36.85.
Weakest Q2: General Dynamics (NYSE:NYSE:GD) Creator of the famous M1 Abrahms tank, General Dynamics (NYSE:GD) develops aerospace, marine systems, combat systems, and information technology products.
General Dynamics reported revenues of $11.98 billion, up 18% year on year, exceeding analysts’ expectations by 4.1%. Still, it was a slower quarter as it posted a miss of analysts’ backlog sales estimates.
Interestingly, the stock is up 3.1% since the results and currently trades at $303.53.
Leonardo DRS (NASDAQ:DRS) Developing submarine detection systems for the U.S. Navy, Leonardo DRS (NASDAQ:DRS) is a provider of defense systems, electronics, and military support services.
Leonardo DRS reported revenues of $753 million, up 19.9% year on year. This print surpassed analysts’ expectations by 10.7%. Overall, it was an incredible quarter as it also recorded an impressive beat of analysts’ earnings and operating margin estimates.
Leonardo DRS achieved the biggest analyst estimates beat among its peers. The stock is down 2.1% since reporting and currently trades at $27.59.
Parsons (NYSE:PSN) Delivering aerospace technology during the Cold War-era, Parsons (NYSE:PSN) offers engineering, construction, and cybersecurity solutions for the infrastructure and defense sectors.
Parsons reported revenues of $1.67 billion, up 23.1% year on year. This result beat analysts’ expectations by 8.2%. It was a strong quarter as it also produced an impressive beat of analysts’ operating margin and earnings estimates. On the other hand, its backlog missed.
Parsons delivered the highest full-year guidance raise among its peers. The stock is up 27.1% since reporting and currently trades at $98.10.
This content was originally published on Stock Story
