Yahoo Finance Defense Contractors Stocks Q1 Recap: Benchmarking Mercury Systems (NASDAQ:MRCY)
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 Mercury Systems (NASDAQ:MRCY) 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 defense contractors stocks have held roughly steady amidst all this, with share prices up 3.6% on average since the previous earnings results.
Weakest Q1: 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 $208.3 million, down 21% year on year, falling short of analysts' expectations by 2.9%. Overall, it was a weak quarter for the company with a miss of analysts' earnings and organic revenue estimates.
“In the third quarter of fiscal year 2024, we made solid progress in each of our four priority focus areas which included continuing the shift of development to production programs delivering mission-critical processing to the edge; expanding our record backlog to nearly $1.3 billion, up 17% year over year; further leaning our cost structure as we integrate and streamline our operations; and reversing the multi-year trend of growth in working capital, down 8.0% year over year,” said Bill Ballhaus, Mercury’s Chairman and CEO.
Mercury Systems delivered the weakest performance against analyst estimates and slowest revenue growth of the whole group. The stock is up 12.5% since reporting and currently trades at $32.75.
Read our full report on Mercury Systems 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.
Although it had a great quarter compared its peers, the market seems unhappy with the results as the stock is down 7.3% since reporting. It currently trades at $440.01.
Is now the time to buy Northrop Grumman? Access our full analysis of the earnings results here, it's free.
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 $10.73 billion, up 8.6% year on year, exceeding analysts' expectations by 4.2%. It was a mixed quarter for the company.
The stock is flat since the results and currently trades at $294.
Read our full analysis of General Dynamics's results here.
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%. Overall, it was a solid quarter for the company with an impressive beat of analysts' earnings estimates.
The stock is down 12.8% since reporting and currently trades at $168.17.
Read our full, actionable report on AeroVironment here, it's free.
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%. Revenue aside, 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 pulled off the highest full-year guidance raise among its peers. The stock is up 17.5% since reporting and currently trades at $446.37.
Read our full, actionable report on CACI here, it's free.
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