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 Terran Orbital (NYSE:LLAP) and the rest of the defense contractors stocks fared in Q1.

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 16 defense contractors stocks we track reported a strong Q1. As a group, revenues beat analysts’ consensus estimates by 2.3% while next quarter’s revenue guidance was 6.7% below.

Stocks, especially growth stocks with cash flows further into the future, had a good end of 2023. On the other hand, this year has seen more volatile stock market swings due to mixed inflation data. However, defense contractors stocks have held steady amidst all this with share prices up 1.1% on average since the latest earnings results.

Weakest Q1: Terran Orbital (NYSE:LLAP)

Working alongside NASA, Lockheed Martin, and many other notable companies, Terran Orbital (NYSE:LLAP) designs, builds, and tests satellites.

Terran Orbital reported revenues of $27.24 million, down 3.4% year on year. This print fell short of analysts’ expectations by 34.6%. Overall, it was a disappointing quarter for the company with a miss of analysts’ earnings estimates.

Marc Bell, Co-Founder, Chairman, and Chief Executive Officer of Terran Orbital prefaced the release by saying, “Our team was selected by Lockheed Martin to build 18 space vehicles for the SDA’s Tranche 2 Tracking Layer. We value Lockheed Martin’s partnership and look forward to continued collaboration under our Strategic Cooperation Agreement, which runs through 2035. We remain committed to exceeding customer expectations and delivering cutting-edge satellite solutions while our strategic review is still ongoing. This process includes a range of options, including staying independent.”

Terran Orbital delivered the weakest performance against analyst estimates and slowest revenue growth of the whole group. Unsurprisingly, the stock is down 75% since reporting and currently trades at $0.26.

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

Best Q1: 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 $248.6 million, down 1.8% year on year, outperforming analysts’ expectations by 7.8%. The business had an incredible quarter with an impressive beat of analysts’ organic revenue and earnings estimates.

The market seems happy with the results as the stock is up 7.1% since reporting. It currently trades at $36.42.

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

General Dynamics (NYSE:GD)

Creator of the famous M1 Abrahms tank, General Dynamics (NYSE:GD) develops aerospace, marine systems, combat systems, and information technology products.

General Dynamics reported revenues of $11.98 billion, up 18% year on year, exceeding analysts’ expectations by 4.1%. Still, it was a slower quarter as it posted a miss of analysts’ backlog sales estimates.

Interestingly, the stock is up 2.1% since the results and currently trades at $300.67.

Read our full analysis of General Dynamics’s results here.

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 $4.13 billion, up 7.7% year on year. This result topped analysts’ expectations by 1.7%. Overall, it was a strong quarter as it also recorded an impressive beat of analysts’ operating margin estimates and a solid beat of analysts’ earnings estimates.

The stock is flat since reporting and currently trades at $154.25.

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

BWX (NYSE:BWXT)

Contributing components and materials to the famous Manhattan Project in the 1940s, BWX (NYSE:BWXT) is a manufacturer and service provider of nuclear components and fuel for government and commercial industries.

BWX reported revenues of $681.5 million, up 11.3% year on year. This number beat analysts’ expectations by 6.6%. Overall, it was a very strong quarter as it also put up an impressive beat of analysts’ Commercial Operations revenue and operating margin estimates.

The stock is up 6.5% since reporting and currently trades at $98.46.

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

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