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Q3 Earnings Highs And Lows: General Dynamics (NYSE:GD) Vs The Rest Of The Defense Contractors Stocks

By: StockStory

November 20, 2024 at 04:52 AM EST

GD Cover Image

The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how General Dynamics (NYSE: GD) and the rest of the defense contractors stocks fared in Q3.

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 Q3. As a group, revenues beat analysts’ consensus estimates by 2.2% while next quarter’s revenue guidance was 2.7% below.

While some defense contractors stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 4.3% since the latest earnings results.

General Dynamics (NYSE: GD)

Creator of the famous M1 Abrahms tank, General Dynamics (NYSE: GD) develops aerospace, marine systems, combat systems, and information technology products.

General Dynamics reported revenues of $11.67 billion, up 10.4% year on year. This print fell short of analysts’ expectations by 0.8%. Overall, it was a softer quarter for the company with a miss of analysts’ EBITDA estimates.

"The company continues to see strong growth and steady improvement in operating performance," said Phebe Novakovic, chairman and chief executive officer.

Unsurprisingly, the stock is down 8.2% since reporting and currently trades at $280.96.

Read our full report on General Dynamics 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 a solid beat of analysts’ organic revenue and EPS estimates.

Mercury Systems achieved the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 15.9% since reporting. It currently trades at $39.71.

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 22.1% since the results and currently trades at $195.50.

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

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 $672 million, up 13.9% year on year. This print surpassed analysts’ expectations by 2%. It was a strong quarter as it also put up full-year revenue guidance beating analysts’ expectations and a decent beat of analysts’ EBITDA estimates.

The stock is up 10.2% since reporting and currently trades at $131.95.

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

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 print beat analysts’ expectations by 7%. Overall, it was an exceptional quarter as it also produced a solid beat of analysts’ backlog estimates and an impressive beat of analysts’ EBITDA estimates.

The stock is down 14.8% since reporting and currently trades at $446.80.

Read our full, actionable report on CACI 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% in November), 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 potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.

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

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