The aerospace and defense industry is a stock market segment with decent growth over the last year. The iShares U.S. Aerospace and Defense ETF (BATS:ITA), the benchmark ETF for tracking the aerospace and defense industry, has increased by 15% this past 12 months. The increase in returns regarding the defense industry is partly due to the continued war in Ukraine, which began back in February of 2022.
Even though some defense stocks have performed very well over the past year, others — like the ones I mention below — have struggled due to a number of factors, including financial struggles, uncertainty regarding their future outlook and rushed leadership changes. The companies in this article represent defense stocks to sell until positive results outshine these companies’ negative outlook.
Mercury Systems (MRCY)
Mercury Systems (NASDAQ:MRCY), located in Andover, Massachusetts, provides technological equipment for the aerospace and defense industry. The company develops and manufactures various modules and products used among defense contractors throughout Europe, Asia and the U.S., primarily for aviation applications. Mercury systems’ components include integrated radio frequency function assembles, multi-chip modules, power amplifiers and limiters, equalizers and memory units for electronic warfare.
Over the last year, Mercury Systems has seen a drop in its share price of approximately 13%. That has been due to poor performance recently, leadership changes and a profitable future looking more and more unlikely. Its most recent earnings report, published on August 15, stated a total net revenue decline of 13% compared to the previous year. Also, the $17 million net income for the three months ended July 1, 2022, turned into a net loss of $8 million in 2023. On the date of the announcement, Bill Ballhaus was appointed as president and CEO of the company. That move was made to help address its financial challenges and operational issues with Mercury systems.
Virgin Galactic (SPCE)
Virgin Galactic (NYSE:SPCE) develops and manufactures spacecraft for human spaceflight purposes. Its customers include government organizations, private individuals and scientific researchers.
Virgin Galactic started trading publicly back in late 2019. It reached an all-time high in February of 2021 of $59 per share. And its share price has fallen dramatically since then. In just the past year, it’s dropped 63%. That’s due to compounding quarters of net losses and negative cash flow, which may soon lead Virgin Galactic to seek funding to stay afloat.
On August 1, the company reported earnings results for the second quarter of 2023, which stated a net loss of $134 million, a loss increase of 21% compared to the year before. And its total revenue grew from $357,000 in Q2 2022 to $1.9 million in Q2 2023.
Virgin Galactic stated that within the last five months, it has had five successful space flights. Even with this somewhat positive news, its stock price continues to fall. With space tourism being such a new endeavor, this stock is one to stay away from for the time being.
Kaman (KAMN)
Kaman (NYSE:KAMN), headquartered in Bloomfield, Connecticut, is a company that provides components and similar aircraft structures for use in the aerospace and defense industry. Some of its products include aircraft bearings, hydraulic equipment for application in the production of helicopters and metallic and composite aerostructures.
Recently, Kaman shared some positive results from its most recent earnings report, which stated net income was $5.3 million and operating revenue increased by 21% year-over-year. It also announced in August that Carroll Lane, the senior vice president of Kaman, will take over as interim chief financial officer.
Still, Kaman had a decline in its share price of approximately 32% within the last year. That drop was heavily caused by its third-quarter earnings report for 2022, showing a significant drop in net income of 85% year-over-year. As a result, its stock price plummeted over 35% on the news. Kaman’s share price has yet to recover.
As of this writing, Noah Bolton did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
