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Mercury Systems Beats Q2 Estimates With Record Bookings as Defense Contractors Post Strong Quarter
Mercury Systems reported fourth quarter fiscal 2026 revenues of $289.8 million, up 6.1% year on year and 9.2% above analysts' expectations, as the 14 defense contractors stocks tracked by the report collectively beat consensus revenue estimates by 4% and guided next quarter 1.1% above expectations. Chairman and CEO Bill Ballhaus said the company delivered record bookings, record backlog, record revenue, the highest EBITDA margin of the year, and robust free cash flow, though Mercury shares are down 18.5% since reporting and trade at $85.56. Huntington Ingalls posted the group's best quarter, with revenues of $3.42 billion, up 10.9% year on year and 8.2% above expectations, while its shares have traded sideways at $278.53. Parsons delivered the weakest quarter, with revenues of $1.58 billion, flat year on year and 1.9% below expectations, alongside full-year revenue and EBITDA guidance that missed significantly, sending its stock down 25.5% to $46.19. Northrop Grumman reported revenues of $10.88 billion, up 5.1% and 0.5% above expectations, with shares flat at $526.95, and Leidos reported revenues of $4.56 billion, up 7.2% and 2.6% above expectations, with its stock up 10.4% at $131.09. On average, defense contractors shares are down 2.9% since the latest earnings results.
Lee Jae-myung Says South Korea Will Not Send Troops to Iran War, Weighs Expanded Cheonghae Unit Role
President Lee Jae-myung, South Korea's leader, confirmed that South Korea will not become involved in the war in the Middle East, whether directly or indirectly, and that any role the country plays will have no connection to combat. Speaking to reporters on September 18, he said no troops would be sent to participate in or intervene in the war, stressing that South Korea adheres to the principle of not taking part directly in combat and will continue to uphold it. However, the South Korean leader said that while it will not participate directly in the fighting, the situation is complex and constantly changing, so the government must consider measures to protect the lives of its citizens, commercial vessels and crude oil shipping routes. He added that the South Korean military has the Cheonghae naval task force, which is ready to carry out missions to protect the country's interests, and acknowledged that the government is considering expanding its role in such missions. The remarks came in response to questions about the possibility of South Korea deploying troops near the Strait of Hormuz, amid pressure from the United States for South Korea to support operations against Iran, particularly in safeguarding navigation through the Strait of Hormuz. Although the South Korean government still insists no decision has been made, speculation has been growing in recent weeks that it may consider sending troops or equipment into the area.
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HII Wins $336 Million Navy Contract for USS William J. Clinton Long-Lead Materials
The U.S. Department of War announced a $336,112,000 Navy contract for Huntington Ingalls Industries to advance procurement of long-lead materials for construction of the future USS William J. Clinton, designated CVN 82. Work will be executed in Newport News, Virginia, with completion anticipated by March 2039, and shipbuilding and conversion funding from FY 2026 will be obligated at the time of award. The award is a sub-component of the Navy's larger aircraft carrier replacement program, which defense websites say the service plans to fund at $22.34 billion over the next five years, with this contract seen as among the first in a sequence of awards as procurement accelerates. The sole-source contract reaffirms HII's status as the sole nuclear carrier builder for the U.S. Navy and extends revenue visibility to 2039, supporting the company's raised full-year shipbuilding revenue guidance of $10.2 billion to $10.4 billion and shipbuilding operating margin of 6% to 6.5%. The contract is cost-only and undefinitized, meaning work begins before final pricing and terms are agreed, adding to cash strain after HII used $31 million of net cash in operating activities in Q2, spent $193 million on capital expenditure, and posted negative free cash flow of $611 million for the first half of 2026 against full-year FCF guidance of $500-600 million. Hedge fund ownership in HII rose 18% in the second quarter to 47 funds from 40, with AQR Capital Management remaining the largest stakeholder at approximately $184 million as of June 30, 2026, followed by Diamond Hill Capital at over $55 million and Citadel Investment Group at $53 million.
