While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns.
Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Top large-cap losers last week included IonQ, Tempus AI, AeroVironment, Astera Labs, Nebius, Kratos, F5, Klarna, Leonardo DRS, and First Horizon, driven by sector pullbacks, policy concerns on defense buybacks, a high-profile cyber breach, and weak earnings.
Market swings can be tough to stomach, and volatile stocks often experience exaggerated moves in both directions.
While many thrive during risk-on environments, many also struggle to maintain investor confidence when the ride gets bumpy.
A number of stocks jumped in the afternoon session after a key inflation data aligned with forecasts, bolstering hopes for continued interest rate cuts from the Federal Reserve.
As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the defense contractors industry, including Leonardo DRS (NASDAQ:DRS) and its peers.
Even if they go mostly unnoticed, industrial businesses are the backbone of our country. But their prominence also brings high exposure to the ups and downs of economic cycles.
Luckily, the tide is turning in their favor as the industry’s 21.8% return over the past six months has topped the S&P 500 by 5.8 percentage points.
In today’s market, large companies dominate the landscape and grow their leads by acquiring smaller competitors - a trend that will accelerate with the Trump administration.
However, some mid-sized players will continue thriving because they’ve carved durable niches for themselves.
Generating cash is essential for any business, but not all cash-rich companies are great investments.
Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
A number of stocks fell in the afternoon session after investors took some profits off the table as markets awaited signals on future monetary policy from the Federal Reserve's Jackson Hole symposium later in the week.
Aerospace and defense company Leonardo DRS (NASDAQ:DRS) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 10.1% year on year to $829 million. The company’s full-year revenue guidance of $3.56 billion at the midpoint came in 1.2% above analysts’ estimates. Its non-GAAP profit of $0.23 per share was 7.4% above analysts’ consensus estimates.
"You get what you pay for" often applies to expensive stocks with best-in-class business models and execution.
While their quality can sometimes justify the premium, they typically experience elevated volatility during market downturns when expectations change.
The $10-50 price range often includes mid-sized businesses with proven track records and plenty of growth runway ahead.
They also usually carry less risk than penny stocks, though they’re not immune to volatility as many lack the scale advantages of their larger peers.
American defense manufacturers are reportedly grappling with China's decision to limit the supply of critical minerals. This move has resulted in production delays and a global scramble for mineral stockpiles.
Aerospace and defense company Leonardo DRS (NASDAQ:DRS) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 10.1% year on year to $829 million. The company’s full-year revenue guidance of $3.56 billion at the midpoint came in 1.2% above analysts’ estimates. Its non-GAAP profit of $0.23 per share was 7.4% above analysts’ consensus estimates.
Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the market seems confused about where we could go next.
This uncertainty has led to a flat return for the industry over the past six months while the S&P 500 was up 4.1%.
While profitability is essential, it doesn’t guarantee long-term success.
Some companies that rest on their margins will lose ground as competition intensifies - as Jeff Bezos said, "Your margin is my opportunity".
