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Elbit Systems' Second Quarter Aerospace Revenue Drops on Unfavorable Project Mix, Lower European Training Sales

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Elbit Systems' Second Quarter Aerospace Revenue Drops on Unfavorable Project Mix, Lower European Training Sales

Elbit Systems' (ESLT) shares fell Tuesday after the Israeli defense electronics company's aerospace segment sales declined 8% year over year in the second quarter due to an unfavorable project mix and lower European training sales.

The company reported aerospace revenue of $495 million in the quarter ended June 30, compared with $536.8 million a year earlier. Elbit's shares fell 9% in Tuesday trading. The stock has gained about 33% this year.

Elbit's second-quarter non-GAAP per-share earnings increased year-over-year to $4.14 from $3.23. Three analysts in a FactSet poll projected $3.69. Revenue increased to $2.29 billion from $1.97 billion a year ago. Two analysts expected $2.23 billion.

Income tax expense in the quarter surged to $32.7 million from $7.1 million a year earlier, the company said.

"The higher tax expense in the second quarter of 2026 was mainly driven by the implementation of the (Organization for Economic Co-operation and Development) Pillar II global minimum tax rules," Chief Financial Officer Yaacov Kagan said during the earnings call, according to a FactSet transcript. "The effective tax rate in the second quarter of 2026 was 16.4%, compared to 5.6% in the second quarter of 2025."

The company posted a record $32 billion order backlog at the end of June. International orders comprised 73% of the backlog and 42% of orders are slated for execution through the end of 2027, according to the company.

"New business and the quarterly backlog increase provide us with good visibility into future sales growth," Kagan said, noting that "Europe and Asia continue to be meaningful growth engines."

Land revenue in the second quarter jumped 32% to $770.2 million, while sales in the command, control, communications, computers and intelligence and cyber business grew 11% to $252.9 million.

Intelligence, surveillance, target acquisition and reconnaissance and electronic warfare revenue increased 22% to $447.8 million.

In the broader defense sector, Morgan Stanley said in a note last month that the market underappreciates potential defense budget growth. The investment firm projects a minimum $1.1 trillion base budget for 2027, with additional sector upside driven by capacity expansion in priority missile and munitions programs.

Last month, other key industry players including General Dynamics (GD), RTX (RTX), Lockheed Martin (LMT) and Northrop Grumman (NOC) raised their full-year guidance and posted second-quarter sales ahead of Street views.

Price: $771.87, Change: $-74.17, Percent Change: -8.77%

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