Reflecting On Defense Contractors Stocks’ Q2 Earnings: AeroVironment (NASDAQ:AVAV)

Earnings results often indicate what direction a company will take in the months ahead. With Q2 behind us, let’s have a look at AeroVironment (NASDAQ:AVAV) 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 15 defense contractors stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 4.7% while next quarter’s revenue guidance was 6.7% below.

Stocks, especially growth stocks with cash flows further into the future, had a good end of 2023. On the other hand, this year has seen more volatile stock market swings due to mixed inflation data. Thankfully, defense contractors stocks have been resilient with share prices up 7.2% on average since the latest earnings results.

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 $189.5 million, up 24.4% year on year. This print exceeded analysts’ expectations by 2.1%. Overall, it was a decent quarter for the company with an impressive beat of analysts’ earnings estimates but full-year revenue guidance missing analysts’ expectations.

“AeroVironment has once again delivered excellent results, including record first-quarter revenue that’s 24% higher than the same period last fiscal year,” said Wahid Nawabi, AeroVironment chairman, president and chief executive officer.

AeroVironment scored the fastest revenue growth but had the weakest full-year guidance update of the whole group. Even though it had a great quarter relative to its peers, the market seems discontent with the results. The stock is down 10.5% since reporting and currently trades at $37.58.

Is now the time to buy AeroVironment? Access our full analysis of the earnings results here, it’s free.

Best Q2: Mercury Systems (NASDAQ:MRCY)

Founded in 1981, Mercury Systems (NASDAQ:MRCY) specializes in providing processing subsystems and components for primarily defense applications.

Mercury Systems reported revenues of $248.6 million, down 1.8% year on year, outperforming analysts’ expectations by 7.8%. It was an incredible quarter for the company with an impressive beat of analysts’ organic revenue and earnings estimates.

The market seems happy with the results as the stock is up 10.5% since reporting. It currently trades at $37.58.

Is now the time to buy Mercury Systems? Access our full analysis of the earnings results here, it’s free.

Weakest Q2: 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 $11.98 billion, up 18% year on year, exceeding analysts’ expectations by 4.1%. It was a weaker quarter for the company with a miss of analysts’ backlog sales estimates.

Interestingly, the stock is up 1.2% since the results and currently trades at $297.98.

Read our full analysis of General Dynamics’s results here.

ICF (NASDAQ:ICFI)

Originally founded as Inner City Fund, ICF International (NASDAQ:ICFI) delivers consulting and technology services in health, environment, and infrastructure.

ICF reported revenues of $512 million, up 2.4% year on year, surpassing analysts’ expectations by 1.3%. More broadly, it was a very strong quarter for the company with an impressive beat of analysts’ operating margin estimates and a solid beat of analysts’ earnings estimates.

The stock is up 11.4% since reporting and currently trades at $162.05.

Read our full, actionable report on ICF here, it’s free.

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 $2.04 billion, up 19.7% year on year, surpassing analysts’ expectations by 5.5%. More broadly, it was a strong quarter for the company with an impressive beat of analysts’ backlog sales estimates.

The stock is up 7.4% since reporting and currently trades at $479.17.

Read our full, actionable report on CACI here, it’s free.

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