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Reflecting On Defense Contractors Stocks’ Q1 Earnings: KBR (NYSE:KBR)


Kayode Omotosho /
2024/07/08 3:46 am EDT

The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how defense contractors stocks fared in Q1, starting with KBR (NYSE:KBR).

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. 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 1.9% on average since the previous earnings results.

KBR (NYSE:KBR)

With projects such as constructing Guantanamo Bay, KBR provides professional services and technologies, specializing in engineering, construction, and government services sectors.

KBR reported revenues of $1.82 billion, up 6.8% year on year, topping analysts' expectations by 2.1%. It was a strong quarter for the company, with a decent beat of analysts' earnings and backlog sales estimates.

KBR Total Revenue

The stock is down 3.1% since the results and currently trades at $63.91.

Is now the time to buy KBR? 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

The stock is down 8.2% since the results and currently trades at $435.48.

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 0.3% since the results and currently trades at $29.18.

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

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 $1.94 billion, up 11.1% year on year, surpassing analysts' expectations by 4.4%. It was a very strong quarter for the company, with an impressive beat of analysts' backlog sales estimates and full-year revenue guidance exceeding analysts' expectations.

CACI achieved the highest full-year guidance raise among its peers. The stock is up 11.5% since the results and currently trades at $423.52.

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

Kratos (NASDAQ:KTOS)

Established with a commitment to supporting national security, Kratos (NASDAQGS:KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.

Kratos reported revenues of $277.2 million, up 19.6% year on year, surpassing analysts' expectations by 10.7%. It was a very strong quarter for the company, with an impressive beat of analysts' organic revenue and earnings estimates.

Kratos achieved the biggest analyst estimates beat among its peers. The stock is up 10.5% since the results and currently trades at $20.75.

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

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