Looking back on defense contractors stocks’ Q1 earnings, we examine this quarter’s best and worst performers, including AeroVironment (NASDAQ:AVAV) 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. As a group, revenues beat analysts’ consensus estimates by 2.5% while next quarter’s revenue guidance was in line.
Luckily, defense contractors stocks have performed well with share prices up 12.4% on average since the latest earnings results.
Best Q1: AeroVironment (NASDAQ:AVAV)
Focused on the future of autonomous military combat, AeroVironment (NASDAQ:AVAV) specializes in advanced unmanned aircraft systems and electric vehicle charging solutions.
AeroVironment reported revenues of $275.1 million, up 39.6% year on year. This print exceeded analysts’ expectations by 12.9%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ EBITDA estimates and full-year EBITDA guidance exceeding analysts’ expectations.
AeroVironment pulled off the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise of the whole group. Unsurprisingly, the stock is up 26.3% since reporting and currently trades at $241.54.
Is now the time to buy AeroVironment? Access our full analysis of the earnings results here, it’s free.
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 $4.25 billion, up 6.8% year on year, outperforming analysts’ expectations by 3.6%. The business had a very strong quarter with a solid beat of analysts’ backlog estimates and a solid beat of analysts’ EBITDA estimates.
The market seems happy with the results as the stock is up 10.4% since reporting. It currently trades at $163.20.
Is now the time to buy Leidos? Access our full analysis of the earnings results here, it’s free.
Weakest 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 $9.47 billion, down 6.6% year on year, falling short of analysts’ expectations by 4.7%. It was a disappointing quarter as it posted full-year EPS guidance missing analysts’ expectations significantly and a significant miss of analysts’ adjusted operating income estimates.
Northrop Grumman delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 4.6% since the results and currently trades at $506.49.
Read our full analysis of Northrop Grumman’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 $2.17 billion, up 11.8% year on year. This number topped analysts’ expectations by 1.5%. It was a very strong quarter as it also put up an impressive beat of analysts’ backlog estimates and an impressive beat of analysts’ EBITDA estimates.
The stock is up 19.2% since reporting and currently trades at $505.
Read our full, actionable report on CACI here, it’s free.
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 $682.3 million, up 13% year on year. This print surpassed analysts’ expectations by 5.1%. Overall, it was a very strong quarter as it also produced a solid beat of analysts’ EBITDA estimates and a solid beat of analysts’ adjusted operating income estimates.
BWX had the weakest full-year guidance update among its peers. The stock is up 28% since reporting and currently trades at $143.44.
Read our full, actionable report on BWX here, it’s free.
Market Update
Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.
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