Looking back on defense contractors stocks’ Q4 earnings, we examine this quarter’s best and worst performers, including Parsons (NYSE: PSN) 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 mixed Q4. As a group, revenues beat analysts’ consensus estimates by 2.6% while next quarter’s revenue guidance was 4.3% above.

In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.

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 $1.73 billion, up 16.1% year on year. This print fell short of analysts’ expectations by 1.3%. Overall, it was a slower quarter for the company with full-year EBITDA guidance missing analysts’ expectations.

CEO Commentary“2024 was another exceptional year for Parsons. We achieved record results for total revenue, adjusted EBITDA, adjusted EBITDA margin, operating cash flow, contract win rates, and contract awards. We are delivering consistent results as we reported double-digit organic revenue growth every quarter for the last two years,” said Carey Smith, chair, president, and chief executive officer.

The stock is down 15.6% since reporting and currently trades at $62.

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

Best Q4: 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 $223.1 million, up 13% year on year, outperforming analysts’ expectations by 23.9%. The business had an incredible quarter with an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ EPS estimates.

Mercury Systems pulled off the biggest analyst estimates beat among its peers. The stock is down 2.6% since reporting. It currently trades at $41.01.

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

Weakest Q4: AeroVironment (NASDAQ: AVAV)

Focused on the future of autonomous military combat, AeroVironment (NASDAQ: AVAV) specializes in advanced unmanned aircraft systems and electric vehicle charging solutions.

AeroVironment reported revenues of $167.6 million, down 10.2% year on year, falling short of analysts’ expectations by 10.9%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations.

AeroVironment delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. As expected, the stock is down 5.9% since the results and currently trades at $133.76.

Read our full analysis of AeroVironment’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 $2.1 billion, up 14.5% year on year. This result surpassed analysts’ expectations by 3.4%. It was an exceptional quarter as it also logged a solid beat of analysts’ backlog and EBITDA estimates.

The stock is down 14.5% since reporting and currently trades at $397.96.

Read our full, actionable report on CACI 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 $746.3 million, up 2.9% year on year. This print beat analysts’ expectations by 2.4%. Overall, it was a strong quarter as it also put up full-year revenue guidance exceeding analysts’ expectations and an impressive beat of analysts’ Commercial Operations revenue estimates.

BWX pulled off the highest full-year guidance raise among its peers. The stock is up 1.3% since reporting and currently trades at $101.18.

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

Market Update

As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.

Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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