615240

Q1 Rundown: ICF (NASDAQ:ICFI) Vs Other Defense Contractors Stocks


Petr Huřťák /
2024/07/10 4:51 am EDT

Earnings results often indicate what direction a company will take in the months ahead. With Q1 now behind us, let’s have a look at ICF (NASDAQ:ICFI) 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 Q1; on average, revenues beat analyst consensus estimates by 3.5%. while next quarter's revenue guidance was 0.7% above consensus. Stocks--especially those trading at higher multiples--had a strong end of 2023, but 2024 has seen periods of volatility. Mixed signals about inflation have led to uncertainty around rate cuts, and while some of the defense contractors stocks have fared somewhat better than others, they collectively declined, with share prices falling 1.8% on average since the previous earnings results.

ICF (NASDAQ:ICFI)

Originally founded as Inner City Fund, ICF International (NASDAQ:ICFI) delivers consulting and technology services in health, environment, and infrastructure.

ICF reported revenues of $494.4 million, up 2.3% year on year, exceeding analysts' expectations by 1.3%. Overall, it was a very good quarter for the company with an impressive beat of analysts' earnings estimates.

Commenting on the results, John Wasson, chair and chief executive officer, said, "This was a record first quarter for ICF. Revenues increased 2% year-on-year, however, adjusting for the divestiture of our commercial marketing business lines during 2023, first quarter revenue increased 9% year-over-year. This strong performance was led by robust growth in revenues from commercial energy clients and supported by solid revenue growth from government clients.

ICF Total Revenue

The stock is down 9.9% since reporting and currently trades at $129.65.

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

Best Q1: Northrop Grumman (NYSE:NOC)

Responsible for the development of the first stealth bomber, Northrop Grumman (NYSE:NOC) specializes in providing aerospace, defense, and security solutions for various industry applications.

Northrop Grumman reported revenues of $10.13 billion, up 8.9% year on year, outperforming analysts' expectations by 3.8%. It was a stunning quarter for the company with an impressive beat of analysts' organic revenue estimates and a decent beat of analysts' earnings estimates.

Northrop Grumman Total Revenue

Although it had a great quarter compared its peers, the market seems unhappy with the results as the stock is down 8.1% since reporting. It currently trades at $436.

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

Weakest Q1: Mercury Systems (NASDAQ:MRCY)

Listed on the NASDAQ in 1998, Mercury Systems (NASDAQGS:MRCY) specializes in providing processing subsystems and components for defense applications.

Mercury Systems reported revenues of $208.3 million, down 21% year on year, falling short of analysts' expectations by 2.9%. It was a weak quarter for the company with a miss of analysts' earnings and organic revenue estimates.

Mercury Systems had the weakest performance against analyst estimates and slowest revenue growth in the group. Interestingly, the stock is up 2.5% since the results and currently trades at $29.82.

Read our full analysis of Mercury Systems's results here.

General Dynamics (NYSE:GD)

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

General Dynamics reported revenues of $10.73 billion, up 8.6% year on year, surpassing analysts' expectations by 4.2%. Looking more broadly, it was a mixed quarter for the company: General Dynamics blew past analysts' revenue expectations this quarter. On the other hand, its EPS missed and its backlog fell short Wall Street's estimates.

The stock is down 4.2% since reporting and currently trades at $280.47.

Read our full, actionable report on General Dynamics 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 $604 million, up 6.3% year on year, in line with analysts' expectations. Looking more broadly, it was a good quarter for the company with a decent beat of analysts' earnings estimates.

BWX had the weakest full-year guidance update among its peers. The stock is down 4.4% since reporting and currently trades at $94.51.

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

Join Paid Stock Investor Research

Help us make StockStory more helpful to investors like yourself. Join our paid user research session and receive a $50 Amazon gift card for your opinions. Sign up here.