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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 Leidos (NYSE:LDOS) 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 3.9% above.
While some defense contractors stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.5% since the latest earnings results.
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 $4.37 billion, up 9.7% year on year. This print exceeded analysts’ expectations by 5.6%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ backlog and adjusted operating income estimates.
"2024 was a fantastic year for Leidos, as we delivered robust results at or above the high end of our guidance range across all metrics," said Leidos Chief Executive Officer Tom Bell.
The stock is down 5.5% since reporting and currently trades at $134.94.
Is now the time to buy Leidos? Access our full analysis of the earnings results here, it’s free.
Best Q4: 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 $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 delivered the biggest analyst estimates beat among its peers. The market seems content with the results as the stock is up 3% since reporting. It currently trades at $43.37.