Wrapping up Q3 earnings, we look at the numbers and key takeaways for the defense contractors stocks, including Northrop Grumman (NYSE:NOC) 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 4.2% since the latest earnings results.
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 $10.42 billion, up 4.3% year on year. This print fell short of analysts’ expectations by 2.7%. Overall, it was a mixed quarter for the company with a solid beat of analysts’ EBITDA estimates but a significant miss of analysts’ revenue estimates.
Northrop Grumman delivered the weakest performance against analyst estimates of the whole group. Unsurprisingly, the stock is down 8.6% since reporting and currently trades at $550.16.
Is now the time to buy Northrop Grumman? 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 6.4% since reporting. It currently trades at $171.36.
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 highest full-year guidance raise but had the slowest revenue growth in the group. As expected, the stock is down 20.7% since the results and currently trades at $63.10.
Read our full analysis of Parsons’s results here.
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 $18.61 billion, up 8.8% year on year. This print met analysts’ expectations. It was a strong quarter as it also logged a solid beat of analysts’ backlog estimates and full-year EPS guidance beating analysts’ expectations.
The stock is down 8.2% since reporting and currently trades at $464.51.
Read our full, actionable report on Lockheed Martin here, it’s free for active Edge members.
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 result topped analysts’ expectations by 8.1%. Overall, it was a strong quarter as it also recorded an impressive beat of analysts’ revenue estimates and a solid beat of analysts’ EBITDA estimates.
The stock is up 7.3% since reporting and currently trades at $320.12.
Read our full, actionable report on Huntington Ingalls here, it’s free for active Edge members.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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