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 Lockheed Martin (NYSE:LMT) 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 13 defense contractors stocks we track reported a strong Q1. As a group, revenues beat analysts’ consensus estimates by 1.6% while next quarter’s revenue guidance was in line.
In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.
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 $17.96 billion, up 4.5% year on year. This print exceeded analysts’ expectations by 1.1%. Overall, it was a strong quarter for the company with a solid beat of analysts’ backlog estimates and an impressive beat of analysts’ adjusted operating income estimates.
"The momentum we created last year continued into the first quarter of 2025, with sales growing 4% year-over-year and free cash flow generation of $955 million. We continued investing in the business with over $850 million of research and development and capital expenditures in the quarter, and returned $1.5 billion to shareholders through dividends and share repurchases," said Lockheed Martin Chairman, President and CEO Jim Taiclet.
Lockheed Martin Total Revenue
Interestingly, the stock is up 3.7% since reporting and currently trades at $474.98.
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 $4.25 billion, up 6.8% year on year, outperforming analysts’ expectations by 3.6%. The business had a very strong quarter with an impressive beat of analysts’ backlog and EBITDA estimates.
Leidos Total Revenue
The market seems happy with the results as the stock is up 5.5% since reporting. It currently trades at $156.
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.
Northrop Grumman delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 8.9% since the results and currently trades at $483.50.
Established with a commitment to supporting national security, Kratos (NASDAQ:KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.
Kratos reported revenues of $302.6 million, up 9.2% year on year. This result beat analysts’ expectations by 3.9%. Overall, it was a very strong quarter as it also recorded a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EPS estimates.
The stock is down 6.6% since reporting and currently trades at $33.72.
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 number topped analysts’ expectations by 1.7%. It was a strong quarter as it also produced a solid beat of analysts’ EBITDA estimates.
The stock is up 2.3% since reporting and currently trades at $128.98.
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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