A Look Back at Defense Contractors Stocks’ Q4 Earnings: KBR (NYSE:KBR) Vs The Rest Of The Pack
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 Q4.
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 mixed Q4. As a group, revenues beat analysts’ consensus estimates by 2.6% while next quarter’s revenue guidance was 5% above.
Thankfully, share prices of the companies have been resilient as they are up 6.2% 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 $2.12 billion, up 22.7% year on year. This print exceeded analysts’ expectations by 6.7%. Overall, it was a satisfactory quarter for the company with an impressive beat of analysts’ adjusted operating income estimates.
"KBR delivered sustained performance throughout the year culminating in a strong fourth quarter, with significant revenue and earnings growth as well as margin expansion," said Stuart Bradie, President and CEO.
KBR Total Revenue
KBR achieved the fastest revenue growth of the whole group. The results were likely priced in, however, and the stock is flat since reporting. It currently trades at $50.19.
Founded in 1981, Mercury Systems (NASDAQ:MRCY) specializes in providing processing subsystems and components for primarily defense applications.
Mercury Systems reported revenues of $223.1 million, up 13% year on year, outperforming analysts’ expectations by 23.9%. The business had an incredible quarter with an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ EPS estimates.
Mercury Systems Total Revenue
Mercury Systems delivered the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 13.9% since reporting. It currently trades at $47.96.
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 $167.6 million, down 10.2% year on year, falling short of analysts’ expectations by 10.9%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations.
AeroVironment delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. Interestingly, the stock is up 4.5% since the results and currently trades at $148.50.
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 $2.1 billion, up 14.5% year on year. This number topped analysts’ expectations by 3.4%. Overall, it was an exceptional quarter as it also recorded a solid beat of analysts’ backlog and EBITDA estimates.
The stock is down 9.7% since reporting and currently trades at $420.
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 $4.37 billion, up 9.7% year on year. This print beat analysts’ expectations by 5.6%. It was an exceptional quarter as it also logged an impressive beat of analysts’ backlog and adjusted operating income estimates.
The stock is down 2.4% since reporting and currently trades at $139.42.
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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