Episode Details

Elbit Systems (ESLT) Q2 2026 — Elbit is a foreign private issuer, so Q2 2026 arrived on a Form 6-K, not an 8-K. It cleared EDGAR at 6:01am ET on August 11, BEFORE the open, so August 11 was the reaction session: the shares gapped down 5.96 pct, traded to USD760.42 and closed -8.27 pct at USD776.08 on 2.36x average volume. USD783.62 on August 14. Elbit Systems is an international defense technology group. The June quarter was excellent on every operating measure: revenue up 15.9 pct to USD2,287.1M, Non-GAAP diluted EPS USD4.14 against a USD3.69 bar, GAAP operating margin up 160bp to 9.6 pct, and a record USD32.0bn order backlog. The shares fell 8.27 pct anyway. THE CALL: AVOID (3/5, MEDIUM - A FLAWLESS QUARTER AT AN UNFORGIVING PRICE) — base-case value ~$487.49 vs ~$783.62 today. KEY METRICS: - CALL: AVOID, 3/5. Fair value USD487.49 vs the USD783.62 close, -37.8 pct. Bear USD313.24 / base USD487.49 / bull USD730.80, weighted 35/35/30 across an unlevered DCF at 8.5 pct, 30x our 2027 Non-GAAP EPS and 18x 2027 EBITDA. Even the bull road sits 6.7 pct under the tape. - THE PRINT: revenue USD2,287.1M vs USD2,251.5M expected, up 15.9 pct. Non-GAAP diluted EPS USD4.14 vs a USD3.69 bar, a 12.2 pct beat and 28.2 pct growth. GAAP EPS USD3.61. Gross margin 25.3 pct from 24.0, GAAP operating margin 9.6 pct from 8.0, Non-GAAP 10.4 pct from 8.9. - THE EPS BASIS, PROVEN BOTH WAYS: Q1 Non-GAAP USD3.87 plus Q2 USD4.14 equals the filed six-month USD8.01, so the vendor epsActual series is Non-GAAP. Q1 GAAP USD3.34 plus Q2 USD3.61 equals the filed USD6.95. The USD0.53 gap is the published bridge, USD25.5M exactly. - THE ORDER BOOK: USD32.0bn at June 30, an all-time record, up 34.5 pct from USD23.8bn a year earlier and 6.0 pct from USD30.2bn at March 31. That implies about USD4,087M of gross intake on USD2,287.1M of revenue - a book-to-bill near 1.8x and 3.7 years of revenue contracted. - THE TAX LINE, THE ONE THING THAT CHANGED: the effective rate went 5.6 pct to 16.4 pct on the OECD global minimum tax named in the release. That is USD25.7M more tax, about USD0.53 a diluted share - the size of the whole Non-GAAP bridge. FY2025 was 9.9 pct. Structural, not timing. - GROWTH MIX: Land +32.1 pct, ISTAR and EW +21.9, the American arm +16.5, C4I and Cyber +11.5, Aerospace -7.8 on project mix. By region Israel +27.5 pct, Asia-Pacific +22.1, North America +14.9 - and Europe FLAT at USD563.3M vs USD563.8M, though the release says the book grew mainly from Europe. - CASH: first-half operating cash flow USD517.8M, up 70.3 pct - but contract liabilities (customer advances) rose USD698.8M while receivables and contract assets rose USD834.4M, so they nearly cancel. Capex doubled to USD157.6M. Net cash USD695.4M. Trailing FCF USD681.5M, a 1.81 pct yield. What to watch: UP: a clear beat against the USD3.82 third-quarter bar on November 17 rebuilds our 2026 line and lifts every valuation road; European revenue inflecting from a flat USD563.3M confirms the order wave is converting. DOWN: book-to-bill falling toward 1.0x, or the tax rate settling above 16.4 pct. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.