Looking back on defense contractors stocks’ Q3 earnings, we examine this quarter’s best and worst performers, including Lockheed Martin (NYSE:LMT) 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 satisfactory Q3. As a group, revenues beat analysts’ consensus estimates by 2.3% while next quarter’s revenue guidance was 2.7% below.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 7.9% since the latest earnings results.

Lockheed Martin (NYSE:LMT)

Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE:LMT) specializes in defense, space, homeland security, and information technology products.

Lockheed Martin reported revenues of $17.1 billion, up 1.3% year on year. This print fell short of analysts’ expectations by 1.5%. Overall, it was a slower quarter for the company with a significant miss of analysts’ EBITDA estimates and a slight miss of analysts’ organic revenue estimates.

"In the third quarter, we advanced our strategic, operational and financial priorities, as demonstrated by our record backlog of more than $165 billion, 48 F-35 deliveries, increased production on missile programs, and $2.1 billion of free cash flow generation," said Lockheed Martin Chairman, President and CEO Jim Taiclet.

Unsurprisingly, the stock is down 19% since reporting and currently trades at $498.44.

Read our full report on Lockheed Martin here, it’s free.

Best Q3: 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 $204.4 million, up 13% year on year, outperforming analysts’ expectations by 12.5%. The business had an incredible quarter with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EPS estimates.

Mercury Systems pulled off 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 $39.

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

Weakest Q3: Huntington Ingalls (NYSE:HII)

Building Nimitz-class aircraft carriers used in active service, Huntington Ingalls (NYSE:HII) develops marine vessels and their mission systems and maintenance services.

Huntington Ingalls reported revenues of $2.75 billion, down 2.4% year on year, falling short of analysts’ expectations by 4%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.

Huntington Ingalls delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 23.8% since the results and currently trades at $191.10.

Read our full analysis of Huntington Ingalls’s results here.

Kratos (NASDAQ:KTOS)

Established with a commitment to supporting national security, Kratos (NASDAQ:KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.

Kratos reported revenues of $275.9 million, flat year on year. This result was in line with analysts’ expectations. Zooming out, it was a mixed quarter as it also produced an impressive beat of analysts’ EPS estimates but EBITDA guidance for next quarter missing analysts’ expectations significantly.

The stock is up 14.4% since reporting and currently trades at $27.38.

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

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 $20.09 billion, up 49.2% year on year. This result beat analysts’ expectations by 1.4%. Overall, it was a strong quarter as it also produced a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ organic revenue estimates.

RTX scored the fastest revenue growth among its peers. The stock is down 7.9% since reporting and currently trades at $116.06.

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

Market Update

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), has 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 heading into 2025.

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