Quarterly earnings results are a good time to check in on a company’s progress, especially compared to its peers in the same sector. Today we are looking at RTX (NYSE: RTX) and the best and worst performers in the defense contractors industry.

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 13 defense contractors stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 3.6% while next quarter’s revenue guidance was in line.

While some defense contractors stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 2.7% since the latest earnings results.

Best Q3: 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 $22.48 billion, up 11.9% year on year. This print exceeded analysts’ expectations by 5.4%. Overall, it was a stunning quarter for the company with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EBITDA estimates.

"Strong execution in the third quarter enabled us to deliver double-digit organic sales growth* across all three segments and our sixth consecutive quarter of year-over-year adjusted segment margin expansion*," said RTX Chairman and CEO Chris Calio.

Interestingly, the stock is up 8.6% since reporting and currently trades at $174.50.

Is now the time to buy RTX? Access our full analysis of the earnings results here, it’s free for active Edge members.

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 $225.2 million, up 10.2% year on year, outperforming analysts’ expectations by 9.5%. The business had an exceptional quarter with an impressive beat of analysts’ organic revenue estimates and a beat of analysts’ EPS estimates.

Mercury Systems scored the biggest analyst estimates beat among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 2.1% since reporting. It currently trades at $74.

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

Slowest Q3: Parsons (NYSE: PSN)

Delivering aerospace technology during the Cold War-era, Parsons (NYSE: PSN) offers engineering, construction, and cybersecurity solutions for the infrastructure and defense sectors.

Parsons reported revenues of $1.62 billion, down 10.4% year on year, falling short of analysts’ expectations by 2.3%. It was a slower quarter as it posted a significant miss of analysts’ revenue estimates and a miss of analysts’ backlog estimates.

Parsons delivered the slowest revenue growth in the group. Interestingly, the stock is up 1.2% since the results and currently trades at $80.44.

Read our full analysis of Parsons’s results here.

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 $2.29 billion, up 11.2% year on year. This print beat analysts’ expectations by 1.1%. Overall, it was a strong quarter as it also produced an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ adjusted operating income estimates.

CACI had the weakest full-year guidance update among its peers. The stock is up 12.4% since reporting and currently trades at $584.40.

Read our full, actionable report on CACI here, it’s free for active Edge members.

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 $18.61 billion, up 8.8% year on year. This result was in line with analysts’ expectations. It was a strong quarter as it also logged a solid beat of analysts’ backlog estimates and full-year EPS guidance beating analysts’ expectations.

The stock is down 7.5% since reporting and currently trades at $468.11.

Read our full, actionable report on Lockheed Martin here, it’s free for active Edge members.

Market Update

As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.

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