Elbit Systems Q3: Double-Digit Revenue Growth, Operational Challenges, Increased Defense Demand & More

Elbit Systems Ltd ESLT reported third-quarter FY23 revenue of $1.501 billion, an increase of 11.3% year-over-year, beating the consensus of $1.45 billion.

Segment revenues: Aerospace $462.1 million (+24.3% Y/Y), C4I and Cyber $188.1 million (+8.9% Y/Y), ISTAR and EW $287.1 million (flat Y/Y), and Land $341.3 million (+6.6% Y/Y).

Elbit Systems of America revenues decreased by 2% Y/Y due to lower precision-guided munition sales.  

Gross margin expanded by 30 bps to 24.5%; adjusted gross margin was 24.9% for the quarter, versus 25% in 3Q22.

Adjusted operating margin expanded to 7.8% versus 6.3% in 3Q22. Adjusted EPS improved $1.65 from $1.40 a year ago, missing the consensus of $1.70.

ESLT's backlog of orders as of September 30, 2023, totaled $16.6 billion.

The company's cash flows used in operating activities for the nine months ending September 30, 2023, were $(200) million, compared to cash provided of $44.6 million a year ago, affected mainly by the increase in inventories.

Following the October 7, 2023, attacks from Gaza, Elbit Systems has seen a surge in demand from the Israel Ministry of Defense despite operational challenges like relocating production lines and about 15% of its Israeli workforce being on reserve duty. 

"Double digit revenue growth and an almost $2 billion increase in the backlog coupled with the improvement in profitability in the third quarter provide us with confidence in our ability to meet our long term plan and overcome the current challenges," commented Bezhalel (Butzi) Machlis, President and CEO.

Dividend: ESLT declared a dividend of $0.50 per share, payable on January 8, 2024, to the shareholders of record date on December 26, 2023. 

Price Action: ESLT shares are trading lower by 2.81% at $206.49 on Tuesday.