Looking back on defense contractors stocks’ Q4 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 mixed Q4. As a group, revenues beat analysts’ consensus estimates by 2.6% while next quarter’s revenue guidance was 4% above.
While some defense contractors stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.9% since the latest earnings results.
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. This print fell short of analysts’ expectations by 10.9%. Overall, it was a disappointing quarter for the company with full-year revenue guidance missing analysts’ expectations.
AeroVironment delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update of the whole group. Unsurprisingly, the stock is down 7% since reporting and currently trades at $132.22.
Read our full report on AeroVironment 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 an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ EPS estimates.
Mercury Systems achieved the biggest analyst estimates beat among its peers. The market seems content with the results as the stock is up 2.1% since reporting. It currently trades at $42.96.
Is now the time to buy Mercury Systems? Access our full analysis of the earnings results here, it’s free.
Huntington Ingalls (NYSE:HII)
Building Nimitz-class aircraft carriers used in active service, Huntington Ingalls (NYSE:HII) develops marine vessels and their mission systems and maintenance services.
Huntington Ingalls reported revenues of $3.00 billion, down 5.4% year on year, falling short of analysts’ expectations by 1.8%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.
The stock is flat since the results and currently trades at $195.26.
Read our full analysis of Huntington Ingalls’s results here.
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 $4.37 billion, up 9.7% year on year. This result surpassed analysts’ expectations by 5.6%. It was an exceptional quarter as it also recorded an impressive beat of analysts’ backlog estimates and adjusted operating income estimates.
The stock is down 2.5% since reporting and currently trades at $139.19.
Read our full, actionable report on Leidos here, it’s free.
RTX (NYSE:RTX)
Originally focused on refrigeration technology, Raytheon (NSYE:RTX) provides a a variety of products and services to the aerospace and defense industries.
RTX reported revenues of $21.62 billion, up 8.5% year on year. This number beat analysts’ expectations by 5.8%. Overall, it was a very strong quarter as it also produced a solid beat of analysts’ organic revenue and EBITDA estimates.
The stock is up 2.3% since reporting and currently trades at $128.
Read our full, actionable report on RTX here, it’s free.
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