As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q3. Today, we are looking at defense contractors stocks, starting with KBR (NYSE: KBR).

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 4.7% 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 $1.93 billion, flat year on year. This print fell short of analysts’ expectations by 1.5%. Overall, it was a mixed quarter for the company with a solid beat of analysts’ backlog estimates but full-year revenue guidance missing analysts’ expectations.

“Despite revenue headwinds, KBR achieved year on year double digit Adjusted EBITDA growth, strong cash conversion and maintained operational momentum with a strong book to bill. Our diverse portfolio, prudent cost management and focus on value-add for our customers delivered enhanced margins in line with our strategy,” said Stuart Bradie, Chairman, President & CEO.

Interestingly, the stock is up 3.3% since reporting and currently trades at $44.30.

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

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, outperforming analysts’ expectations by 5.4%. The business had a stunning quarter with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EBITDA estimates.

The market seems happy with the results as the stock is up 6.2% since reporting. It currently trades at $171.05.

Is now the time to buy RTX? 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 and backlog estimates.

Parsons delivered the highest full-year guidance raise but had the slowest revenue growth in the group. As expected, the stock is down 16% since the results and currently trades at $66.80.

Read our full analysis of Parsons’s results here.

Northrop Grumman (NYSE: NOC)

Responsible for the development of the first stealth bomber, Northrop Grumman (NYSE: NOC) specializes in providing aerospace, defense, and security solutions for various industry applications.

Northrop Grumman reported revenues of $10.42 billion, up 4.3% year on year. This result missed analysts’ expectations by 2.7%. Aside from that, it was a mixed quarter as it also produced a solid beat of analysts’ EBITDA estimates but a significant miss of analysts’ revenue estimates.

Northrop Grumman had the weakest performance against analyst estimates among its peers. The stock is down 8.7% since reporting and currently trades at $549.42.

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

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 $4.47 billion, up 6.7% year on year. This print beat analysts’ expectations by 4.1%. It was an exceptional quarter as it also put up an impressive beat of analysts’ backlog estimates and a solid beat of analysts’ EBITDA estimates.

The stock is down 3% since reporting and currently trades at $187.24.

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

Market Update

Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.

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