Defense contractor Elbit Systems Ltd. (ESLT) is having a moment. The company's order backlog has ballooned to a record $32 billion, fueled by war-driven demand, and its latest quarterly results beat Wall Street's expectations. Yet, investors are hitting the sell button this morning, sending shares down in premarket trading.
Here's the paradox: Elbit reported adjusted earnings per share of $4.14, comfortably above the $3.69 analysts were looking for. Revenue came in at $2.287 billion, also topping the $2.220 billion consensus. The numbers are solid, the backlog is booming, but the stock is down 6.24% to $793.25 in premarket action. That's after a stunning 90.50% run over the past 12 months, so maybe some profit-taking is in order.
Earnings Snapshot
The quarter had plenty of bright spots. Adjusted gross profit jumped to $586.5 million from $480.4 million a year ago, with margins expanding to 25.6% from 24.4%. Adjusted operating income climbed to $237.5 million from $175.1 million in the prior-year quarter.
Cash flow is also looking healthier. Operating cash flow for the first six months of 2026 rose to $517.8 million from $304.0 million a year earlier, helped by higher net income and increased contract liabilities. As of June 30, 2026, the company held $255.3 million in cash and cash equivalents.
Shareholders are getting a little something too. The Board declared a $1.00 per-share dividend, with a record date of October 13, 2026, and payment on October 26, 2026, subject to a 16.8% withholding tax.
Order & Business Performance
The headline number is the backlog: $32.0 billion as of June 30, with growth during the quarter driven mainly by Europe. About 73% of that backlog comes from orders outside Israel, and 42% is expected to be executed during the remainder of 2026 and 2027.
Segment performance was mixed but mostly strong. C4I and Cyber revenue rose 11% year over year, ISTAR and EW increased 22%, Land revenue jumped 32%, and Elbit Systems of America grew 17%. Aerospace, however, was a laggard, with revenue down 8% year over year due to an unfavorable project mix and lower training and simulation sales in Europe.
Impact of Middle East Conflict
The ongoing Middle East conflict is a double-edged sword for Elbit. On one hand, the company is seeing "materially higher demand" from Israel's Ministry of Defense, which could drive additional orders. On the other, the conflict has caused supply-chain and operational disruptions, including higher transportation costs, shipping delays, material shortages, employee reserve-duty call-ups, trade restrictions, and even attacks on some facilities.
The company says it has increased production, strengthened inventories, protected employees, and taken steps to mitigate supply-chain risks. It's a delicate balancing act, but so far, the backlog suggests the demand side is winning.
So why the premarket dip? It could be that the stock had already priced in a lot of good news, or investors are worried about the disruptions. Either way, Elbit's fundamentals look strong, and the war-fueled demand doesn't seem to be letting up anytime soon.
