Elbit Systems shares drop 6% despite Q2 earnings beat

Shares of Elbit Systems Ltd. fell 6% on Tuesday after the Israeli defense contractor reported second-quarter earnings that exceeded analyst estimates but issued a cautious outlook for margins and future performance.

The company, which specializes in military electronics, aerospace and cyber systems, posted a net profit of $102 million, or $2.15 per share, for the three months ended June 30. This compared with a net profit of $88 million, or $1.85 per share, in the same period a year earlier. Analysts polled by Refinitiv had expected earnings of $1.95 per share on average.

Revenue rose 8% year-over-year to $1.25 billion, driven by strong demand for defense systems amid ongoing geopolitical tensions. The company attributed the increase to higher orders from government and defense clients, particularly in Europe and Asia.

Despite the earnings beat, Elbit Systems’ stock declined 6% to $155.20 in early trading, underperforming the broader market. Investors appeared to focus on the company’s guidance, which suggested margin pressure due to rising costs and supply chain challenges.

Management noted that while demand remains robust, input costs for raw materials, labor and logistics have increased, squeezing profitability. Elbit Systems also flagged potential delays in some defense procurement cycles, which could impact revenue growth in the second half of the year.

The company maintained its full-year revenue guidance of $4.8 billion to $5.0 billion but trimmed its earnings per share outlook to $7.80-$8.20 from a prior range of $8.00-$8.50. Analysts had previously forecast earnings of $8.30 per share for the full year.

Elbit Systems’ shares have gained 12% year-to-date, outperforming the S&P 500’s 9% rise, but the latest decline reflects investor concerns over margin sustainability amid a shifting global defense spending landscape.