Let’s dig into the relative performance of BWX (NYSE:BWXT) and its peers as we unravel the now-completed Q2 defense contractors earnings season.

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 very strong Q2. As a group, revenues beat analysts’ consensus estimates by 4.7% while next quarter’s revenue guidance was 6.7% below.

Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.

Thankfully, defense contractors stocks have been resilient with share prices up 9.8% on average since the latest earnings results.

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 print exceeded analysts’ expectations by 6.6%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ Commercial Operations revenue andoperating margin estimates.

Interestingly, the stock is up 15.9% since reporting and currently trades at $107.19.

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

Best Q2: Mercury Systems (NASDAQ:MRCY)

Founded in 1981, Mercury Systems (NASDAQ:MRCY) specializes in providing processing subsystems and components for primarily defense applications.