Defence contractor Elbit Systems reported increased second-quarter profits on Wednesday, bolstered by heightened global demand for its military technologies. The company earned $2.08 per diluted share, excluding one-time items, up from $1.65 a year earlier. Revenue rose to $1.63 billion from $1.45 billion, with a notable shift in regional sales distribution.

While sales to Israel increased to 27% of quarterly revenue from 17% last year, Europe emerged as Elbit’s largest customer, accounting for 29%. North America remained steady at 23%, while Asia-Pacific’s share slipped to 15%.

CEO Bezhalel Machlis emphasized the company’s global growth prospects, noting that “given its pipeline, it’s quite obvious the company will continue to grow quite rapidly in the coming years.” He also highlighted that ongoing global conflicts are driving higher investments in defense, providing Elbit with significant opportunities. “Unfortunately, globally there are many conflicts right now, and these conflicts drive high investment in defence … Our portfolio is very wide and we can take advantage of this.”

Elbit’s order backlog of $21.1 billion suggests the company could achieve $7 billion in revenue by 2025, ahead of its original 2026 target. To support this growth, Elbit plans to open a new automated munitions facility in southern Israel and a plant for unmanned aerial vehicles (UAVs). “What really limits us is our operational capacity,” Machlis explained, adding that these new facilities will “drastically” boost production and revenue.

Elbit’s global operations, with approximately 40 subsidiaries in countries including the U.S., U.K., and Germany, are also contributing to its expanded production capabilities. Machlis indicated that these expansions would soon meet the high demand anticipated in the market.

Since the Gaza conflict began on October 7, Elbit has accelerated the development of new technologies, including UAVs, communication systems, and AI capabilities, for the Israeli Defense Forces (IDF). “The portfolio was improved drastically and this war has been an accelerator for many developments,” Machlis said.

Elbit’s Nasdaq-listed shares rose 4.6% to $198.67 in early trading but have faced an 11% decline this year, partly due to investor divestments, including those by Scotiabank’s 1832 Asset Management.

(Adapted from MarketScreener.com)