Earnings results often indicate what direction a company will take in the months ahead. With Q1 now behind us, let’s have a look at AeroVironment (NASDAQ:AVAV) 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 14 defense contractors stocks we track reported a strong Q1; on average, revenues beat analyst consensus estimates by 3.2%. 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 while some of the defense contractors stocks have fared somewhat better than others, they collectively declined, with share prices falling 0.5% on average since the previous earnings results.
AeroVironment (NASDAQ:AVAV) Focused on the future of autonomous military combat, AeroVironment (NASDAQGS:AVAV) specializes in advanced unmanned aircraft systems and electric vehicle charging solutions.
AeroVironment reported revenues of $197 million, up 5.9% year on year, topping analysts' expectations by 4.2%. It was a strong quarter for the company, with an impressive beat of analysts' revenue and earnings estimates.
The stock is down 6.7% since the results and currently trades at $180.
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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 and EPS estimates.
The stock is down 8.3% since the results and currently trades at $434.99.
Weakest Q1: Mercury Systems (NASDAQ:MRCY) Listed on the NASDAQ in 1998, Mercury Systems (NASDAQGS:MRCY) specializes in providing processing subsystems and components for 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' revenue and earnings estimates.
Mercury Systems had the weakest performance against analyst estimates and slowest revenue growth in the group. The stock is down 8% since the results and currently trades at $26.76.
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%. It was a very strong quarter for the company, with an impressive beat of analysts' organic revenue estimates and a decent beat of analysts' earnings estimates.
The stock is down 1.3% since the results and currently trades at $100.3.
Lockheed Martin (NYSE:NYSE:LMT) Responsible for renowned military systems like the F-35 fighter jet, Lockheed Martin Lockheed Martin (NYSE:LMT) specializes in defense, space, intelligence, homeland security, and information technology solutions.
Lockheed Martin reported revenues of $17.2 billion, up 13.7% year on year, surpassing analysts' expectations by 7.5%. It was a stunning quarter for the company, with an impressive beat of analysts' organic revenue estimates.
The stock is up 1.3% since the results and currently trades at $467.57.
