A tense geopolitical environment in certain parts of the world is boosting the business of defense sector companies like this one.
Leonardo DRS (DRS +15.02%) was a defense sector stock of choice for many market participants on the second trading day of the week. The company’s shares zoomed almost 15% higher on the back of a quarterly and annual earnings report that featured robust growth numbers.
A solid fourth quarter
Leonardo DRS’s fourth quarter saw the company earn $1.06 billion in revenue, up 8% year over year. Net income not in accordance with generally accepted accounting principles (GAAP) rose at a higher pitch, increasing by 13% to $114 million, or $0.42 per share.
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On average, according to Zack’s, analysts tracking the stock were expecting only $993 million on the top line for Leonardo DRS, and $0.37 in non-GAAP (adjusted) net profit.
In its earnings release, the company attributed the notable improvements in fundamentals to strong demand for products like tactical radars and advanced infrared sensing.
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Full steam ahead
The trailing results for Leonardo DRS were impressive, while its guidance for the entirety of 2026 was also encouraging. The company estimates its revenue will be $3.85 billion to $3.95 billion, which would be notably above the under $3.65 billion of 2025. Similarly, adjusted net income is expected to be $1.20 to $1.26 per share, against the actual result of $1.15 last year. The consensus analyst top-line forecast is $3.82 billion, and the profitability forecast is 1.26 per share.
These are prosperous times for the defense industry, particularly given the U.S. military’s buildup in the Middle East lately. I feel this country will remain on a fairly aggressive footing for some time, so I think Leonardo DRS and its veteran sector peers will continue to do well.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
