Q2 Rundown: RTX (NYSE:RTX) Vs Other Defense Contractors Stocks
Let’s dig into the relative performance of RTX (NYSE:RTX) and its peers as we unravel the now-completed Q2 defense contractors earnings season.
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 very strong Q2. As a group, revenues beat analysts’ consensus estimates by 4.9% while next quarter’s revenue guidance was 6.7% below.
Inflation progressed towards the Fed’s 2% goal at the end of 2023, leading to strong stock market performance. On the other hand, 2024 has been a bumpier ride as the market switches between optimism and pessimism around rate cuts and inflation. Thankfully, defense contractors stocks have been resilient with share prices up 7.1% on average since the latest earnings results.
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 $19.72 billion, up 7.7% year on year. This print exceeded analysts’ expectations by 2.3%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ organic revenue estimates.
"RTX delivered strong operational performance in the second quarter, with 10 percent organic sales* growth, adjusted margin* expansion across all three segments and $2.2 billion in free cash flow*," said RTX President and CEO Chris Calio.
Interestingly, the stock is up 11.5% since reporting and currently trades at $116.90.
Is now the time to buy RTX? 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 12.6% since reporting. It currently trades at $38.30.
Is now the time to buy Mercury Systems? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: 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 $1.86 billion, up 5.8% year on year, falling short of analysts’ expectations by 1.1%. It was a slower quarter for the company with a miss of analysts’ backlog sales estimates and full-year revenue guidance missing analysts’ expectations.
KBR posted the weakest performance against analyst estimates in the group. As expected, the stock is down 1% since the results and currently trades at $67.91.
Read our full analysis of KBR’s results here.
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 $4.13 billion, up 7.7% year on year, surpassing analysts’ expectations by 1.7%. More broadly, it was a strong quarter for the company with a solid beat of analysts’ earnings estimates.
The stock is flat since reporting and currently trades at $151.49.
Read our full, actionable report on Leidos here, it’s free.
Leonardo DRS (NASDAQ:DRS)
Developing submarine detection systems for the U.S. Navy, Leonardo DRS (NASDAQ:DRS) is a provider of defense systems, electronics, and military support services.
Leonardo DRS reported revenues of $753 million, up 19.9% year on year, surpassing analysts’ expectations by 10.7%. Revenue aside, it was an incredible quarter for the company with an impressive beat of analysts’ earnings estimates.
Leonardo DRS delivered the biggest analyst estimates beat among its peers. The stock is down 2.4% since reporting and currently trades at $27.50.
Read our full, actionable report on Leonardo DRS here, it’s free.
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