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Defense Contractors Stocks Q1 In Review: General Dynamics (NYSE:GD) Vs Peers


Adam Hejl /
2024/07/09 3:36 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 General Dynamics (NYSE:GD) 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 Q1; on average, revenues beat analyst consensus estimates by 3.2%. while next quarter's revenue guidance was 0.7% above consensus. Valuation multiples for many growth stocks have not yet reverted to their early 2021 highs, but the market was optimistic at the end of 2023 due to cooling inflation. The start of 2024 has been a different story as mixed signals have led to market volatility, and while some of the defense contractors stocks have fared somewhat better than others, they collectively declined, with share prices falling 1.6% on average since the previous earnings results.

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, topping analysts' expectations by 4.2%. 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.

General Dynamics Total Revenue

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

Read our full report on General Dynamics 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

The stock is down 8.1% since the results and 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. 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.

Lockheed Martin (NYSE:LMT)

Responsible for renowned military systems like the F-35 fighter jet, Lockheed Martin Lockheed Martin (NYSE:LMT) specializes in defense, space, intelligence, homeland security, and information technology solutions.

Lockheed Martin reported revenues of $17.2 billion, up 13.7% year on year, surpassing analysts' expectations by 7.5%. 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.

The stock is flat since the results and currently trades at $461.76.

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

Jacobs (NYSE:J)

With offices in six continents, Jacobs Solutions (NYSE:J) offers engineering, technical, professional, and construction services for clients in various industries.

Jacobs reported revenues of $4.27 billion, up 24.4% year on year, falling short of analysts' expectations by 0.7%. It was a weaker quarter for the company, with a miss of analysts' backlog sales estimates.

Jacobs pulled off the fastest revenue growth among its peers. The stock is down 7.6% since the results and currently trades at $137.66.

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

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