As the Q1 earnings season comes to a close, it’s time to take stock of this quarter's best and worst performers in the defense contractors industry, including 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 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. Stocks--especially those trading at higher multiples--had a strong end of 2023, but 2024 has seen periods of volatility. Mixed signals about inflation have led to uncertainty around rate cuts, and defense contractors stocks have held roughly steady amidst all this, with share prices up 1.7% on average since the previous 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 $17.2 billion, up 13.7% year on year, exceeding analysts' expectations by 7.5%. Overall, 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.
"Our strong start to 2024 demonstrates our continued success designing, developing and delivering 21st Century Security solutions in support of integrated deterrence for customers around the world. These first quarter results reinforce our confidence in our ability to achieve the full year financial expectations we set in January," said Lockheed Martin Chairman, President and CEO Jim Taiclet.
The stock is flat since reporting and currently trades at $463.88.
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Best Q1: Northrop Grumman (NYSE: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 9% since reporting. It currently trades at $431.92.
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 had the weakest performance against analyst estimates and slowest revenue growth in the group. Interestingly, the stock is up 11.4% since the results and currently trades at $32.41.
Leidos (NYSE:LDOS) Formed through the split of IT services company SAIC, Leidos (NYSE:LDOS) offers technology and engineering solutions such as military training systems for the defense, civil, and health markets.
Leidos reported revenues of $3.98 billion, up 7.5% year on year, surpassing analysts' expectations by 4.1%. Taking a step back, it was a very strong quarter for the company with an impressive beat of analysts' earnings estimates.
The stock is up 13.4% since reporting and currently trades at $149.30.
RTX (NYSE:NYSE:RTX) Originally focused on refrigeration technology, Raytheon (NYSE:RTN) (NSYE:RTX) provides a a variety of products and services to the aerospace and defense industries.
RTX reported revenues of $19.31 billion, up 12.1% year on year, surpassing analysts' expectations by 4.9%. Revenue aside, 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 flat since reporting and currently trades at $101.72.
This content was originally published on Stock Story
