As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the defense contractors industry, including Huntington Ingalls (NYSE:HII) 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 Q3. As a group, revenues beat analysts’ consensus estimates by 3.6% while next quarter’s revenue guidance was in line.
While some defense contractors stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3.7% since the latest earnings results.
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 $3.19 billion, up 16.1% year on year. This print exceeded analysts’ expectations by 8.1%. Overall, it was a strong quarter for the company with a solid beat of analysts’ revenue estimates and an impressive beat of analysts’ EBITDA estimates.
“We made steady progress on our 2025 operational initiatives in the third quarter," said Chris Kastner, HII’s president and CEO.
Interestingly, the stock is up 4.3% since reporting and currently trades at $311.33.
Is now the time to buy Huntington Ingalls? Access our full analysis of the earnings results here, it’s free for active Edge members.
Best Q3: 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 $22.48 billion, up 11.9% year on year, outperforming analysts’ expectations by 5.4%. The business had a stunning quarter with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EBITDA estimates.
The market seems happy with the results as the stock is up 7.5% since reporting. It currently trades at $173.12.
Is now the time to buy RTX? Access our full analysis of the earnings results here, it’s free for active Edge members.
Slowest Q3: Parsons (NYSE:PSN)
Delivering aerospace technology during the Cold War-era, Parsons (NYSE:PSN) offers engineering, construction, and cybersecurity solutions for the infrastructure and defense sectors.
Parsons reported revenues of $1.62 billion, down 10.4% year on year, falling short of analysts’ expectations by 2.3%. It was a slower quarter as it posted a significant miss of analysts’ revenue estimates and a miss of analysts’ backlog estimates.
Parsons delivered the slowest revenue growth in the group. Interestingly, the stock is up 4.4% since the results and currently trades at $83.07.
Read our full analysis of Parsons’s results here.
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 $1.93 billion, flat year on year. This result lagged analysts' expectations by 1.5%. Zooming out, it was a mixed quarter as it also produced a solid beat of analysts’ backlog estimates but full-year revenue guidance missing analysts’ expectations.
The stock is down 7.1% since reporting and currently trades at $39.86.
Read our full, actionable report on KBR here, it’s free for active Edge members.
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 $4.47 billion, up 6.7% year on year. This print topped analysts’ expectations by 4.1%. It was an exceptional quarter as it also put up a solid beat of analysts’ backlog estimates and an impressive beat of analysts’ EBITDA estimates.
The stock is down 3.8% since reporting and currently trades at $185.69.
Read our full, actionable report on Leidos here, it’s free for active Edge members.
Market Update
Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
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