Elbit Systems: A War-Driven Profit Machine Heads into Q1 Earnings

The defense sector isn’t just booming—it’s roaring, and Elbit Systems (NASDAQ: ESLT) is at the epicenter of this surge. With its Q1 2025 earnings report due on May 20, investors are primed for another quarter of record performance. Let’s break down why this Israeli tech-and-defense powerhouse is a must-watch stock—and why the “Swords of Iron” war isn’t just a headline, but a cash machine.

Q4 2024: A Masterclass in Defense Dominance

Elbit’s fourth-quarter results were a masterclass in leveraging geopolitical chaos. Revenue jumped 19% to $1.93 billion, with net income soaring 72% to $119.3 million (non-GAAP). But the real story is the $22.6 billion backlog—a 27% increase from 2023—locking in years of future revenue. This isn’t just about Israel’s war with Hamas; 65% of that backlog comes from customers like the U.S., Europe, and Asia, proving Elbit’s global reach.

The company’s segments are firing on all cylinders:
- Aerospace: Up 27% thanks to sales of drones and precision-guided munitions.
- Land Systems: A 29% surge from ammunition demand in Israel.
- Elbit of America: Night-vision goggles and medical gear are quietly fueling growth.

Q1 2025: Analysts Are Betting Big

Analysts aren’t just optimistic—they’re doubling down. Q1 revenue is expected to hit $1.69 billion, a 9% jump over last year. But the real kicker is EPS: the consensus sits at $2.06, a 14% increase from Q1 2024’s $1.81. What’s driving this?

1. Backlog Conversion: With $22.6 billion in orders, Elbit isn’t just winning new contracts—it’s executing existing ones. The 57% of the backlog slated for fulfillment by 2026 ensures steady cash flow.
2. Supply Chain Resilience: After the war’s initial disruptions, Elbit relocated production and stockpiled inventory. This should stabilize margins, which hit 8.2% in Q4—up from 6.4% a year earlier.
3. U.S. and European Demand: The Pentagon’s push for drone swarms and Europe’s post-Ukraine-war spending are fueling orders. Elbit’s C4I & Cyber division, which makes command-and-control systems, is a direct beneficiary.

The Risks? Let’s Not Be Naive

Every silver lining has a cloud. The “Swords of Iron” war isn’t over, and supply chain hiccups could resurface. Then there’s the elephant in the room: geopolitical uncertainty. If tensions ease, defense budgets might cool—but don’t count on it.

Elbit’s management has already signaled caution: CEO Bezhalel (Buti) Madhala warned that while 2024 was a record year, 2025 will see “a more normalized rate of growth.” Translation? Expect high single-digit revenue growth, not the 14% surge of 2024.

The Bottom Line: Buy the Dip, Hold the Trend

Elbit isn’t just a one-hit wonder. Analysts have raised 2025 EPS estimates by 10% to $9.80 and 2026 projections by 10% to $11.50. With a dividend yield of 0.6% (that $0.60 payout is just the start), this stock is a buy-and-hold name in the defense tech space.

The numbers don’t lie:
- Cash Flow: Up 372% to $534.6 million in 2024, funding R&D and acquisitions.
- Market Position: Elbit is the go-to for drone systems (its Hermes 900 is a U.S. Marine Corps staple) and electronic warfare tech.
- Valuation: At $386 per share, ESLT trades at 13x the 2025 EPS estimate—a discount to peers like Raytheon (RTX) or Lockheed (LMT).

Investors should watch for two key metrics in Q1:
1. Backlog Updates: Any dip below $22 billion would raise red flags.
2. Margins: If non-GAAP operating margins stay above 8%, it’s a green light.

In a world where defense spending is the new normal, Elbit isn’t just keeping up—it’s leading the charge. This is a stock to own for the next decade, not the next quarter.

Conclusion: Elbit Systems is a rare blend of geopolitical tailwinds, technological dominance, and execution excellence. With a backlog that could fuel growth through 2026 and a valuation that’s still reasonable, this is a buy on any dip below $350. When May 20 rolls around, I’ll be watching to see if this war-driven profit machine keeps churning out victories—or if it’s time to say, “This is a stock that’s ready for takeoff!” BUY.