Quarterly earnings results are a good time to check in on a company’s progress, especially compared to its peers in the same sector. Today we are looking at Parsons (NYSE: PSN) and the best and worst performers in the defense contractors industry.
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 strong Q1. As a group, revenues beat analysts’ consensus estimates by 2.5% while next quarter’s revenue guidance was in line.
Luckily, defense contractors stocks have performed well with share prices up 12.5% on average since the latest earnings results.
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 $1.55 billion, up 1.2% year on year. This print fell short of analysts’ expectations by 3.1%, but it was still a satisfactory quarter for the company with an impressive beat of analysts’ adjusted operating income estimates but a slight miss of analysts’ backlog estimates.
“We are pleased with our performance during Q1 as we achieved record first quarter results for total revenue, net income, earnings per share, adjusted EBITDA, adjusted EBITDA margin, and total and funded backlog are at all time highs,” said Carey Smith, chair, president, and chief executive officer.
Interestingly, the stock is up 4.5% since reporting and currently trades at $71.77.
Is now the time to buy Parsons? Access our full analysis of the earnings results here, it’s free.
Best Q1: 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 $275.1 million, up 39.6% year on year, outperforming analysts’ expectations by 12.9%. The business had an exceptional quarter with a solid beat of analysts’ EBITDA estimates.
AeroVironment pulled off the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 42.4% since reporting. It currently trades at $272.24.
Is now the time to buy AeroVironment? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: 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 $9.47 billion, down 6.6% year on year, falling short of analysts’ expectations by 4.7%. It was a disappointing quarter as it posted full-year EPS guidance missing analysts’ expectations and a significant miss of analysts’ adjusted operating income estimates.
Northrop Grumman delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 6.9% since the results and currently trades at $494.23.
Read our full analysis of Northrop Grumman’s results here.
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 $20.31 billion, up 5.2% year on year. This result topped analysts’ expectations by 1.7%. Overall, it was a strong quarter as it also put up an impressive beat of analysts’ EBITDA estimates.
The stock is up 15.8% since reporting and currently trades at $145.97.
Read our full, actionable report on RTX here, it’s free.
BWX (NYSE: BWXT)
Contributing components and materials to the famous Manhattan Project in the 1940s, BWX (NYSE: BWXT) is a manufacturer and service provider of nuclear components and fuel for government and commercial industries.
BWX reported revenues of $682.3 million, up 13% year on year. This print beat analysts’ expectations by 5.1%. It was a very strong quarter as it also logged an impressive beat of analysts’ EBITDA estimates and an impressive beat of analysts’ adjusted operating income estimates.
BWX had the weakest full-year guidance update among its peers. The stock is up 29.2% since reporting and currently trades at $144.75.
Read our full, actionable report on BWX here, it’s free.
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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