Let’s dig into the relative performance of BWX (NYSE:BWXT) and its peers as we unravel the now-completed Q2 defense contractors earnings season.
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 very strong Q2. As a group, revenues beat analysts’ consensus estimates by 4.7% while next quarter’s revenue guidance was 6.7% below.
Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.
Thankfully, defense contractors stocks have been resilient with share prices up 9.8% on average since the latest earnings results.
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 $681.5 million, up 11.3% year on year. This print exceeded analysts’ expectations by 6.6%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ Commercial Operations revenue andoperating margin estimates.
Interestingly, the stock is up 15.9% since reporting and currently trades at $107.19.
Is now the time to buy BWX? 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 $248.6 million, down 1.8% year on year, outperforming analysts’ expectations by 7.8%. The business had an incredible quarter with an impressive beat of analysts’ organic revenue and earnings estimates.
The market seems happy with the results as the stock is up 7.8% since reporting. It currently trades at $36.64.
Is now the time to buy Mercury Systems? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: 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 $11.98 billion, up 18% year on year, exceeding analysts’ expectations by 4.1%. Still, it was a slower quarter as it posted a miss of analysts’ backlog sales estimates.
Interestingly, the stock is up 2.4% since the results and currently trades at $301.46.
Read our full analysis of General Dynamics’s results here.
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 $18.12 billion, up 8.6% year on year. This print surpassed analysts’ expectations by 6.5%. It was an exceptional quarter as it also produced an impressive beat of analysts’ organic revenue estimates and full-year revenue guidance exceeding analysts’ expectations.
The stock is up 21.6% since reporting and currently trades at $576.90.
Read our full, actionable report on Lockheed Martin here, it’s free.
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 $512 million, up 2.4% year on year. This number surpassed analysts’ expectations by 1.3%. Overall, it was a very strong quarter as it also produced an impressive beat of analysts’ operating margin estimates and a solid beat of analysts’ earnings estimates.
The stock is up 12.7% since reporting and currently trades at $164.
Read our full, actionable report on ICF here, it’s free.
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