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 KBR (NYSE: KBR) and the rest of the defense contractors stocks fared in Q1.
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 as they are up 1.6% on average since the latest earnings results.
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 $2.06 billion, up 13% year on year. This print fell short of analysts’ expectations by 1.4%, but it was still a strong quarter for the company with an impressive beat of analysts’ EBITDA estimates.
“KBR delivered strong performance in the first quarter, driving higher year-over-year revenues, margin, earnings, and cash flow,” said Stuart Bradie, President and CEO.
Interestingly, the stock is up 8.3% since reporting and currently trades at $55.83.
We think KBR is a good business, but is it a buy today? Read our full report here, it’s free.
Best Q1: 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 $4.25 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.
The market seems happy with the results as the stock is up 5.5% since reporting. It currently trades at $156.02.
Is now the time to buy Leidos? 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.
Northrop Grumman delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 11.6% since the results and currently trades at $469.15.
Read our full analysis of Northrop Grumman’s results here.
CACI (NYSE: CACI)
Founded to commercialize SIMSCRIPT, CACI International (NYSE: CACI) offers defense, intelligence, and IT solutions to support national security and government transformation efforts.
CACI reported revenues of $2.17 billion, up 11.8% year on year. This number beat analysts’ expectations by 1.5%. Overall, it was a very strong quarter as it also logged a solid beat of analysts’ backlog and EBITDA estimates.
The stock is up 12.3% since reporting and currently trades at $476.
Read our full, actionable report on CACI here, it’s free.
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 $12.22 billion, up 13.9% year on year. This result surpassed analysts’ expectations by 1.8%. Aside from that, it was a mixed quarter as it also recorded an impressive beat of analysts’ adjusted operating income estimates but a significant miss of analysts’ backlog estimates.
The stock is up 1.9% since reporting and currently trades at $279.80.
Read our full, actionable report on General Dynamics here, it’s free.
Market Update
Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.
Want to invest in winners with rock-solid fundamentals? Check out our 9 Best Market-Beating Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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