Wrapping up Q4 earnings, we look at the numbers and key takeaways for the defense contractors stocks, including Lockheed Martin (NYSE:LMT) 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 mixed Q4. As a group, revenues beat analysts’ consensus estimates by 2.6% while next quarter’s revenue guidance was 4.3% above.
Thankfully, share prices of the companies have been resilient as they are up 5.8% on average since the latest earnings results.
Lockheed Martin (NYSE:LMT)
Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE:LMT) specializes in defense, space, homeland security, and information technology products.
Lockheed Martin reported revenues of $18.62 billion, down 1.3% year on year. This print fell short of analysts’ expectations by 1.3%. Overall, it was a slower quarter for the company with full-year EPS guidance missing analysts’ expectations.
"2024 was another successful and productive year for Lockheed Martin. Our 5% sales growth and record year-end backlog of $176 billion demonstrate the enduring global demand for our advanced defense technology and systems," said Jim Taiclet, Lockheed Martin's Chairman, President and CEO.
The stock is down 5.8% since reporting and currently trades at $474.60.
Read our full report on Lockheed Martin here, it’s free.
Best Q4: 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 $223.1 million, up 13% year on year, outperforming analysts’ expectations by 23.9%. The business had an incredible quarter with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EPS estimates.
Mercury Systems scored the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 8.1% since reporting. It currently trades at $45.51.
Is now the time to buy Mercury Systems? Access our full analysis of the earnings results here, it’s free.
Weakest Q4: 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 $167.6 million, down 10.2% year on year, falling short of analysts’ expectations by 10.9%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations.
AeroVironment delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. Interestingly, the stock is up 5.4% since the results and currently trades at $149.79.
Read our full analysis of AeroVironment’s results here.
Leonardo DRS (NASDAQ:DRS)
Developing submarine detection systems for the U.S. Navy, Leonardo DRS (NASDAQ:DRS) is a provider of defense systems, electronics, and military support services.
Leonardo DRS reported revenues of $981 million, up 5.9% year on year. This number surpassed analysts’ expectations by 4.9%. It was a very strong quarter as it also produced a solid beat of analysts’ adjusted operating income estimates and full-year revenue guidance beating analysts’ expectations.
The stock is up 21.5% since reporting and currently trades at $35.86.
Read our full, actionable report on Leonardo DRS here, it’s free.
KBR (NYSE:KBR)
Known for projects like the construction of Guantanamo Bay, KBR provides professional services and technologies, specializing in engineering, construction, and government services sectors.
KBR reported revenues of $2.12 billion, up 22.7% year on year. This print topped analysts’ expectations by 6.7%. More broadly, it was a satisfactory quarter as it also produced a solid beat of analysts’ adjusted operating income estimates but a significant miss of analysts’ backlog estimates.
KBR delivered the fastest revenue growth among its peers. The stock is flat since reporting and currently trades at $50.55.
Read our full, actionable report on KBR here, it’s free.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
Join Paid Stock Investor Research
Help us make StockStory more helpful to investors like yourself. Join our paid user research session and receive a $50 Amazon gift card for your opinions. Sign up here.