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Defense Contractors Stocks Q1 Recap: Benchmarking Leidos (NYSE:LDOS)


Max Juang /
2024/07/02 3:51 am EDT

Wrapping up Q1 earnings, we look at the numbers and key takeaways for the defense contractors stocks, including Leidos (NYSE:LDOS) 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. 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.

Leidos (NYSE:LDOS)

Formed through the split of IT services company SAIC, Leidos (NYSE:LDOS) offers technology and engineering solutions such as military training systems for the defense, civil, and health markets.

Leidos reported revenues of $3.98 billion, up 7.5% year on year, topping analysts' expectations by 4.1%. It was a very strong quarter for the company, with an impressive beat of analysts' earnings estimates.

Thomas Bell, Leidos Chief Executive Officer, commented, "Our strong start to the year demonstrates the team's ability to deliver for its employees, customers, and shareholders. With greater visibility around customer funding and performance ahead of plan, we are raising guidance on all metrics ahead of our typical pace. We fully expect that 2024 will showcase our commitment to profitable growth. Going forward, our focus remains on operational execution while we develop a robust strategy, invest in disruptive technology-driven solutions, and unlock maximum value through our capability-based organization."

Leidos Total Revenue

The stock is up 10.9% since the results and currently trades at $146.

Is now the time to buy Leidos? 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.

Northrop Grumman Total Revenue

The stock is down 8.3% since the results and currently trades at $435.

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 estimates.

Mercury Systems had the weakest performance against analyst estimates and slowest revenue growth in the group. The stock is down 2.6% since the results and currently trades at $28.35.

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

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. It was a solid 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 5.9% since the results and currently trades at $93.02.

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

AeroVironment (NASDAQ:AVAV)

Focused on the future of autonomous military combat, AeroVironment (NASDAQGS:AVAV) specializes in advanced unmanned aircraft systems and electric vehicle charging solutions.

AeroVironment reported revenues of $197 million, up 5.9% year on year, surpassing analysts' expectations by 4.2%. It was a strong quarter for the company, with an impressive beat of analysts' earnings estimates.

The stock is down 9% since the results and currently trades at $175.67.

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

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