Executive summary
- Focus: identify space stocks with government contracts 2025 that combine recurring government revenue and positive operating or free cash flow to reduce execution risk.
- Top candidates: Northrop Grumman (large prime with $10.4B Q2 revenue and strong cash generation), L3Harris (recurring defense orders, $5.4B Q2 revenue), Iridium (growing recurring service revenue, positive net income and OEBITDA), Parsons (government services with positive adjusted EBITDA).
- Headline metrics: all selected names report positive operating cash flow or positive net income in the latest quarter and maintain active U.S. government contract pipelines.
- Verdict: For risk-conscious investors seeking exposure to the space economy, prioritize holdings that combine durable government-funded backlog with positive cash flow and margin discipline; these space stocks with government contracts 2025 offer differentiated risk profiles versus pure-play launch or commercial-capital-intensive names.
Summary fundamentals
Below are the latest quarter headline fundamentals and market metrics pulled from company releases and market data. Each metric cites the primary source.
Northrop Grumman Corporation (NOC)
- Latest quarter revenue: $10.4 billion.
- YoY revenue change (quarter): +9% (reported).
- Latest quarter EPS: $8.15 diluted GAAP EPS.
- YoY EPS change: improved vs prior year (see earnings release).
- Operating margin / gross margin proxy: operating margin 13.8% (Q2 2025).
- Debt-to-equity: market data and filings show leverage consistent with large primes; see investor presentation for exact leverage metrics.
- Market cap (near data pull): ≈$86–$87B.
L3Harris Technologies (LHX)
- Latest quarter revenue: $5.4 billion.
- YoY revenue change (quarter): +2% reported (6% organic).
- Latest quarter EPS: Diluted EPS $2.44; non-GAAP $2.78.
- YoY EPS change: non-GAAP EPS up 16% YoY.
- Adjusted segment operating margin: 15.9% (Q2 2025).
- Debt-to-equity / market cap: market cap ≈$55–$56B; leverage in-line with mid-cap defense peers.
Iridium Communications (IRDM)
- Latest quarter revenue: $216.9 million total revenue (Q2 2025).
- YoY revenue change (quarter): +8% total revenue YoY.
- Latest quarter EPS: Net income $22.0 million, $0.20 per diluted share.
- YoY EPS change: down vs $0.27 per share year-ago quarter (nonrecurring gain in prior year).
- Gross margin proxy: service revenue is 72% of total revenue; high-recurring revenue mix supports gross margin stability.
- Debt-to-equity and cash: gross term loan debt $1.8B, cash $79.3M; net leverage ~3.6x OEBITDA (trailing twelve months).
Parsons Corporation (PSN)
- Latest quarter revenue: $1.6 billion (Q2 2025).
- YoY revenue change (quarter): down 5% YoY (company cited).
- Latest quarter EPS: Net income $55 million.
- YoY EPS change: decreased vs year-ago period (company reported).
- Adjusted EBITDA / gross margin proxy: adjusted EBITDA $149 million, margins stable within government services.
- Debt-to-equity / market cap: see firm filings; Parsons emphasizes strong backlog and positive cash flow from contracts.
Detailed fundamental analysis
Revenue trends and contract composition
Government-funded work distinguishes these names from capital-intensive commercial launch firms. Northrop’s revenue mix includes large classified and space programs, producing scale revenue and predictable contract inflows, which drove 9% revenue growth in Q2 2025.
L3Harris benefits from a high book-to-bill and a services-weighted revenue base; management reported orders of $8.3B and book-to-bill of 1.5x, signaling durable government demand and revenue visibility.
Iridium’s revenue is dominated by recurring service subscriptions (72% of revenue in the quarter). That recurring base reduces revenue cyclicality relative to satellite manufacturing firms and supports steady cash flow as the firm monetizes connectivity services.
Parsons derives value from engineering and services contracts where contract assets and receivables can temporarily pressure cash flow; the company nevertheless generated positive adjusted EBITDA in Q2 2025.
Margin drivers
Gross and operating margin resilience is the differentiator. Northrop’s operating margin of ~13.8% demonstrates scale and program execution. L3Harris expanded adjusted segment operating margin to 15.9% – a key margin lever as higher-margin services and international sales grow.
Iridium’s margins are supported by recurring subscription economics and relatively low capex intensity compared with launch players; watch equipment revenue volatility, which can compress near-term gross margin.
Parsons’ margin profile is more volatile but improved adjusted EBITDA highlights operating leverage on government project execution.
Balance-sheet strength and cash flow
Large primes (Northrop, L3Harris) operate with investment-grade cash generation despite program-related working capital swings; both reported positive operating cash flows and raised guidance in the quarter.
Iridium reported positive net income and OEBITDA growth while carrying term debt related to its constellation financing; net leverage sits near 3.6x OEBITDA – manageable given predictable service cash flow but worth monitoring.
Parsons reported positive adjusted EBITDA and maintains contract backlog that supports forward cash conversion; working-capital dynamics remain the main execution risk.
Valuation multiples (market context)
Valuation for defense- and space-exposed firms is sector-dependent. Large primes trade at premium multiples reflecting stable backlog and defense budgets; smaller services firms often trade at discounts that can compress in a strong defense-spending cycle. Market caps cited earlier provide a context for P/E and EV/EBITDA comparisons.
Momentum & technical snapshot
Exact technical indicators (RSI(14), MACD status, 50d & 200d SMA positions, 1-month return vs Nasdaq, average daily dollar volume) pulled from market-data pages on the date shown.
Northrop Grumman (NOC) – technical snapshot: RSI(14) 63.486; MACD(12,26) 3.09 (positive vs signal); 50d SMA 599.54; 200d SMA 585.42; 1-month return vs Nasdaq: outperformed (NOC positive vs Nasdaq flat in same period per price action); average daily dollar volume approximated from Avg Vol (3m) 747.9k and share price ~ $610 giving average daily dollar volume ≈ $456M.
L3Harris (LHX) – technical snapshot: RSI(14) ~47.38; MACD 0.43 (slightly positive); 50d SMA and 200d SMA in buy alignment per platform; 1-month return: positive into Q2 print; average Avg Vol (3m) ~1.17M and share price ~ $297 yields average daily dollar volume ≈ $348M.
Iridium (IRDM) – technical snapshot: indicator set neutral to buy; recent RSI readings varied (Investing.com shows neutral); MACD mixed across platforms; Avg Vol (3m) ~2.52M, share price ~$18.7 gives average daily dollar volume ≈ $47M.
Parsons (PSN) – technical snapshot: RSI(14) ~69.9; MACD ~1.22 (positive); 50d and 200d SMA supportive; Avg Vol (10d) ~1.03M and share price ~$85 yields average daily dollar volume ≈ $87M.
Peer comparison
Comparison focuses on growth, margin, leverage, and forward multiples for nearest public peers.
- Lockheed Martin Corporation (peer to Northrop) – Q2 sales ~$18.2B, free cash flow negative in quarter due to working capital; large backlog and prime integrator status.
- RTX (RTX) – Q2 sales ~$21.6B, 9% YoY growth with robust backlog and positive cash generation; large defense prime with space and missile systems exposure.
Comparative view: Northrop and Lockheed trade as large-prime, lower-beta exposures; L3Harris sits as a growth-tilted mid-cap with higher margin expansion potential. Iridium and Parsons present higher-growth or services-oriented profiles but with differing leverage and free-cash characteristics.
Latest earnings highlights & management guidance
Bulleted verbatim takeaways (≤25 words each, quoted exactly from releases/transcripts):
- Northrop Grumman: “We raised 2025 guidance.”
- L3Harris: “Our Trusted Disruptor strategy continues to drive differentiated, mission-critical solutions.”
- Iridium: “We ended the quarter with 2,483,000 total billable subscribers.”
- Parsons: “Adjusted EBITDA was $149 million.”
Strategic moves, catalysts & risks
Contract wins and backlog (catalysts)
- Northrop: continued classified and space program awards and a raised guidance position imply contract execution strength and revenue visibility.
- L3Harris: large orders ($8.3B) and a book-to-bill of 1.5x are catalysts for revenue reacceleration and margin expansion.
- Iridium: growth in engineering & support tied to U.S. government activities and the approved dividend increase signal board confidence.
- Parsons: increased engineering and support activity and a stable backlog support forward revenue conversion.
Product / capability moves
- Northrop and L3Harris continue to invest in ISR, satellite payloads, and space-trusted systems tied to defense modernization budgets.
- Iridium: direct-to-device service testing and PNT (positioning, navigation, timing) services are new commercial levers alongside government contracts.
Risks (from filings/news)
- Program execution risk: large primes carry fixed-price program exposure and occasional one-off charges (Lockheed example of program charges).
- Leverage risk: satellite companies often carry constellation financing debt; Iridium’s net leverage near 3.6x OEBITDA requires monitoring.
- Working-capital volatility and backlog conversion can compress free cash flow in services names (e.g., Parsons).
Valuation & scenario analysis
Assumptions: model horizon 12–18 months; market multiples reflect defense spending continuation but discount potential program-level overruns.
Conservative scenario (assumes program headwinds, flat margins):
- Northrop: multiple compression to 12x forward EPS → implied price range -20% from current. Rationale: re-rating on execution risk.
Base scenario (consensus execution, steady defense budgets):
- Northrop: 16x forward EPS → price target consistent with current market cap with modest upside. L3Harris: maintain 18–20x non-GAAP forward earnings reflecting margin expansion. Iridium: 12–14x EPS reflecting steady service growth. Parsons: EV/EBITDA multiple midpoint given stable backlog. Valuation anchored to reported revenues and guidance.
Optimistic scenario (accelerating budgets, rapid backlog conversion):
- Northrop & L3Harris: premium multiple expansion (18–20x) yielding double-digit upside. Iridium: multiple expansion to 16x from service growth and PNT commercialization. Parsons: re-rating to higher EV/EBITDA if contract wins accelerate margins.
Each scenario requires explicit assumptions on margin progression, contract timing, and macro defense spending; adjust position sizing for scenario confidence.
Trading checklist & signals
Actionable rules for traders and long-term investors focused on these space stocks with government contracts 2025.
Momentum / short-term traders (technical rules):
- Entry: wait for RSI(14) to pull back below 60 on names in uptrends with MACD still above signal (use Investing.com/TradingView live readings).
- Stop: 3–5% below entry for tight swing trades; widen to 8–12% if entering on earnings-season volatility.
- Exit: close if MACD crosses below signal or RSI drops below 40 on daily chart.
- Size: limit single-name exposure to 2–4% of portfolio if using margin/leverage.
Long-term investors (fundamental checklist):
- Confirm positive trailing twelve-month operating cash flow or positive free cash flow in at least three of the last four quarters.
- Backlog and contractual runway: prioritize firms with multi-year government backlog and recurring revenue lines (service revenue >50% preferred).
- Balance-sheet buffer: net leverage below ~3.5–4.0x OEBITDA preferred for mid/small-cap names; large primes can tolerate higher absolute debt but require stable cash conversion.
- Governance and program execution: avoid names with repeated program write-downs or disputed contract settlements.
Position sizing guidance: allocate 3–8% of total equity exposure across prioritized names depending on conviction and scenario planning.
