Looking back on defense contractors stocks’ Q2 earnings, we examine this quarter’s best and worst performers, including CACI (NYSE: CACI) 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 Q2. As a group, revenues beat analysts’ consensus estimates by 3.3% while next quarter’s revenue guidance was in line.
Luckily, defense contractors stocks have performed well with share prices up 13.4% on average since the latest earnings results.
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 $2.30 billion, up 13% year on year. This print exceeded analysts’ expectations by 0.5%. Despite the top-line beat, it was still a mixed quarter for the company with a beat of analysts’ EPS estimates but a significant miss of analysts’ backlog estimates.
Interestingly, the stock is up 4.4% since reporting and currently trades at $497.23.
Is now the time to buy CACI? 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 a solid beat of analysts’ organic revenue and EPS estimates.
The market seems happy with the results as the stock is up 38.3% since reporting. It currently trades at $74.27.
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 and a significant miss of analysts’ adjusted operating income estimates.
Interestingly, the stock is up 6.4% since the results and currently trades at $490.96.
Read our full analysis of Lockheed Martin’s results here.
Kratos (NASDAQ: KTOS)
Established with a commitment to supporting national security, Kratos (NASDAQ: KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.
Kratos reported revenues of $351.5 million, up 17.1% year on year. This print beat analysts’ expectations by 15%. It was a strong quarter as it also produced a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EBITDA estimates.
Kratos pulled off the biggest analyst estimates beat among its peers. The stock is up 37.2% since reporting and currently trades at $81.15.
Read our full, actionable report on Kratos 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 result topped analysts’ expectations by 7.2%. Overall, it was a stunning quarter as it also put up a beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.
BWX scored the highest full-year guidance raise among its peers. The stock is up 13% since reporting and currently trades at $174.55.
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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