As the Q3 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 Leonardo DRS (NASDAQ: DRS) 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 satisfactory Q3. As a group, revenues beat analysts’ consensus estimates by 2.3% while next quarter’s revenue guidance was 2.7% below.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 10.1% since the latest earnings results.

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 $812 million, up 15.5% year on year. This print exceeded analysts’ expectations by 4.7%. Overall, it was an exceptional quarter for the company with a solid beat of analysts’ EBITDA estimates.

“We delivered strong third quarter results, highlighted by robust bookings, mid-teens organic revenue growth, increases to all of our key profit metrics and healthy free cash flow generation. Our strategy, execution focus and steadfast commitment to our customers are driving outcomes that continue to exceed our expectations”Post this CEO Commentary

Interestingly, the stock is up 15.3% since reporting and currently trades at $32.77.

Is now the time to buy Leonardo DRS? Access our full analysis of the earnings results here, it’s free.

Best Q3: 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 $204.4 million, up 13% year on year, outperforming analysts’ expectations by 12.5%. The business had an incredible quarter with an impressive beat of analysts’ organic revenue and EPS estimates.

Mercury Systems delivered the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 23.6% since reporting. It currently trades at $42.34.

Is now the time to buy Mercury Systems? Access our full analysis of the earnings results here, it’s free.

Weakest Q3: Huntington Ingalls (NYSE: HII)

Building Nimitz-class aircraft carriers used in active service, Huntington Ingalls (NYSE: HII) develops marine vessels and their mission systems and maintenance services.

Huntington Ingalls reported revenues of $2.75 billion, down 2.4% year on year, falling short of analysts’ expectations by 4%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.

Huntington Ingalls delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 24.7% since the results and currently trades at $188.96.

Read our full analysis of Huntington Ingalls’s results here.

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 $2.06 billion, up 11.2% year on year. This result beat analysts’ expectations by 7%. Overall, it was an exceptional quarter as it also logged a solid beat of analysts’ backlog and EBITDA estimates.

The stock is down 22.9% since reporting and currently trades at $404.16.

Read our full, actionable report on CACI here, it’s free.

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 $20.09 billion, up 49.2% year on year. This print topped analysts’ expectations by 1.4%. It was a strong quarter as it also put up an impressive beat of analysts’ EBITDA and organic revenue estimates.

RTX scored the fastest revenue growth among its peers. The stock is down 7.7% since reporting and currently trades at $116.27.

Read our full, actionable report on RTX here, it’s free.

Market Update

Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.

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