The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how General Dynamics (NYSE:GD) and the rest of the defense contractors stocks fared in Q4.
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 1.8% since the latest earnings results.
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 $13.34 billion, up 14.3% year on year. This print exceeded analysts’ expectations by 3.4%. Overall, it was a strong quarter for the company with an impressive beat of analysts’ backlog estimates and a decent beat of analysts’ EPS estimates.
"We had a solid fourth quarter, capping off a year that saw steady growth in revenue and earnings across all four segments," said Phebe N. Novakovic, chairman and chief executive officer.
The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $260.96.
Is now the time to buy General Dynamics? Access our full analysis of the earnings results 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 scored the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 10% since reporting. It currently trades at $46.32.
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. As expected, the stock is down 8.9% since the results and currently trades at $129.44.
Read our full analysis of AeroVironment’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 logged an impressive beat of analysts’ backlog and adjusted operating income estimates.
The stock is down 5.8% since reporting and currently trades at $134.55.
Read our full, actionable report on Leidos here, it’s free.
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 print beat analysts’ expectations by 4.9%. Overall, it was a very strong quarter as it also recorded an impressive beat of analysts’ adjusted operating income estimates and full-year revenue guidance beating analysts’ expectations.
The stock is up 8.1% since reporting and currently trades at $31.90.
Read our full, actionable report on Leonardo DRS here, it’s free.
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