As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the defense contractors industry, including RTX (NYSE: RTX) 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 Q2. As a group, revenues beat analysts’ consensus estimates by 3.4% while next quarter’s revenue guidance was in line.
Thankfully, share prices of the companies have been resilient as they are up 5.3% on average since the latest earnings results.
RTX (NYSE: RTX)
Originally focused on refrigeration technology, Raytheon (NSYE:RTX) provides a a variety of products and services to the aerospace and defense industries.
RTX reported revenues of $21.58 billion, up 9% year on year. This print exceeded analysts’ expectations by 4.4%. Overall, it was an exceptional quarter for the company with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EBITDA estimates.
Interestingly, the stock is up 5% since reporting and currently trades at $159.26.
Is now the time to buy RTX? Access our full analysis of the earnings results here, it’s free.
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 $273.1 million, up 9.9% year on year, outperforming analysts’ expectations by 11.9%. The business had an incredible quarter with an impressive beat of analysts’ organic revenue estimates and a beat of analysts’ EPS estimates.
The market seems happy with the results as the stock is up 26.6% since reporting. It currently trades at $68.01.
Is now the time to buy Mercury Systems? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: 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 $18.16 billion, flat year on year, falling short of analysts’ expectations by 2.3%. It was a softer quarter as it posted full-year EPS guidance missing analysts’ expectations significantly and a significant miss of analysts’ adjusted operating income estimates.
As expected, the stock is down 1.1% since the results and currently trades at $456.20.
Read our full analysis of Lockheed Martin’s results here.
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 $1.58 billion, down 5.2% year on year. This result lagged analysts' expectations by 0.9%. Aside from that, it was a mixed quarter as it also logged a solid beat of analysts’ adjusted operating income estimates but a slight miss of analysts’ backlog estimates.
Parsons had the slowest revenue growth among its peers. The stock is down 3.8% since reporting and currently trades at $74.10.
Read our full, actionable report on Parsons here, it’s free.
BWX (NYSE: BWXT)
Contributing components and materials to the famous Manhattan Project in the 1940s, BWX (NYSE: BWXT) is a manufacturer and service provider of nuclear components and fuel for government and commercial industries.
BWX reported revenues of $764 million, up 12.1% year on year. This print topped analysts’ expectations by 7.2%. Overall, it was a stunning quarter as it also put up a beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.
BWX achieved the highest full-year guidance raise among its peers. The stock is up 7% since reporting and currently trades at $165.20.
Read our full, actionable report on BWX here, it’s free.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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