Elbit Systems (TASE:ESLT) Stock Commands A Premium On Record Backlog

Elbit Systems stock came into this earnings day already stretched after a strong run, with the shares at ₪2,340 and trading on a rich P/E of 57.4x. The market has been paying up for the story. The question now is whether today’s numbers justify that premium.

The headline is clear. Q2 showed powerful operating momentum for a defense contractor. Revenue reached US$2,287.1m and basic earnings per share came in at US$3.71, with a record US$32b backlog signalling multi year demand. If the share price reaction does not match that strength, it reflects sentiment rather than a sudden break in fundamentals.

Is Elbit Systems priced for perfection at a 57.4x P/E with a DCF marker near ₪952.29, or does the US$32b backlog change the story entirely? Compare the current multiples and cash flow assumptions side by side in the valuation analysis for Elbit Systems

Q2 2026 Earnings Summary

• Revenue, Q2 2026 vs. Q2 2025: US$2,287.1m vs. US$1,972.7m (up 15.9%)
• Net income, Q2 2026 vs. Q2 2025: US$173.6m vs. US$125.7m (up 38.2%)
• Basic EPS, Q2 2026 vs. Q2 2025: US$3.71 vs. US$2.76 (up 34.5%)
• Order backlog, Q2 2026 vs. Q2 2025: US$32.0b vs. approximately US$23.9b (up about 34%)

Prefer clean charts instead of scrolling through another wall of earnings tables and backlog figures? See Elbit Systems' full financial picture with a clear valuation and earnings snapshot in the company report for Elbit Systems.

Elbit’s Growth Story: Backlog And Margins Under The Microscope

Bulls argue that Elbit Systems is turning a record backlog into high quality, international growth with rising margins and cash generation. Q2 supports parts of that view. Revenue grew 15.9% y/y with broad based contributions, including 22% in ISTAR and electronic warfare and 32% in Land systems, which ties directly to recent Israeli munitions and European artillery wins. Backlog reached US$32b and is about 70% international, with around 42% scheduled for 2H 2026 and 2027. That fits the thesis of multi year visibility and deeper non Israeli exposure, helped by the Serbian UAV joint venture and US CBP awards that stretch to 2029. Non GAAP operating margin of 10.4% and free cash flow of US$150m, with cash conversion near 86%, indicate that operational initiatives and mix are translating into better profitability rather than only top line growth.

Bear Concerns: Overheated Cycle Or Disciplined Expansion At Elbit

Bears worry that Elbit Systems is leaning on a temporary defense upcycle, concentrated Israeli demand, heavy investment and governance inertia, all at a stretched valuation. Q2 does show some exposure to cycle risk. Israel still accounts for 37% of revenue, helped by inventory replenishment after conflict, and Land growth leans on ammunition demand that could normalize if there is regional de escalation. CapEx plans rose from US$220m to US$300m, and R&D is higher, which supports future products but also raises execution risk if directed energy and autonomy programs do not scale commercially. The effective tax rate moved to 16.4% from 5.6% due to OECD rules, which mechanically eats into earnings. At the same time, margin expansion, strong free cash flow and record, diversified backlog do not yet show the backlog quality or profitability erosion that more cautious investors have been concerned about.

Compare whether Elbit Systems' strong backlog, margin progress and higher cash conversion line up with market expectations. See the consensus price target analysis for Elbit Systems

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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