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Defense Stock Roundup: BA, GD, UTX Beat Q1 Earnings, LMT Wins DoD Deal

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The first-quarter reporting cycle is drawing to a close, with 71.6% of the S&P 500 members having reported their results (as of May 3, 2017). Notably, 74.3% of these index members surpassed EPS estimates with a beat ratio of 52.8% in terms of both the top and bottom line. Coming to the broader Aerospace sector, 90% of the companies have released their results, with 77.8% coming up with an earnings beat and 44.4% surpassing revenue estimates.

Naturally, quarterly results dominated this space over the past five trading session. A moderate flow of funds from the Pentagon benefitted the defense stocks. As a result, major indices of the Aerospace-Defense industry ended in the green over the trailing five sessions. While the S&P 500 Aerospace & Defense (Industry) Index gained 1.9%, the Dow Jones U.S. Aerospace & Defense Index rose 0.3% during this period.

Among last week’s highlights, majority of the defense biggies – The Boeing Company (BA - Free Report) , Northrop Grumman Corp. (NOC - Free Report) , General Dynamics Corp. (GD - Free Report) , Raytheon Company , L3 Technologies, Inc. , Harris Corp. and United Technologies, Inc. – released their quarterly figures. Meanwhile, Lockheed Martin (LMT - Free Report) secured a big contract from the Department of Defense (DoD).

(Read Defense Stock Roundup for Apr 26, 2017 here)

Recap of Last Week’s Key Stories

1. Aerospace giant Boeing’s first-quarter 2017 adjusted earnings per share surpassed the Zacks Consensus Estimate, while revenues missed the mark. Backlog at the end of the first quarter increased from the 2016-end level.

On the guidance front, Boeing raised its 2017 earnings per share (EPS) guidance to the range of $9.10–$9.30. Yet, the revenue guidance remained unchanged. The company also reaffirmed its projection for 2017 defense revenues (read more: Boeing Beats on Q1 Earnings, Updates 2017 Guidance).

2. Northrop Grumman’s reported first-quarter 2017 earnings as well as revenues exceeded the Zacks Consensus Estimate. The revenue upside was primarily led by a double-digit increase in Aerospace systems sales. Moreover, net cash outflow from operating activities rose to $439 million.

In terms of outlook, management raised its EPS outlook for 2017 to the band of $11.80–$12.10, while revenue guidance remained unchanged (read more: Northrop Grumman Tops Q1 Earnings, Hikes EPS View).

3. General Dynamics’ first-quarter 2017 earnings from continuing operations beat the Zacks Consensus Estimate, while revenues missed the mark. Both total backlog and funded backlog at the end of the first quarter dropped year over year.

Nevertheless, the company’s cash flow from operating activities improved 11% to $533 million, while free cash flow from operations at the end of the first quarter rose 13.5% to $471 million, (read more: General Dynamics Beats on Q1 Earnings, Backlog Drops).

4. Raytheon’s first-quarter 2017 adjusted earnings from continuing operations as well as revenues surpassed the Zacks Consensus Estimate. However, bookings dropped 8.3%, while backlog declined 1.9% from the prior-year quarter.

Coming to its outlook, Raytheon raised its EPS guidance to the range of $7.25−$7.40 per share and the revenue guidance to the $24.9–$25.4 billion band. However, the company still projects 2017 operating cash flow from continuing operations of approximately $2.8−$3.1 billion (read more: Raytheon Beats Q1 Earnings Estimates, Ups '17 View).

5. L3 Technologies’ first-quarter 2017 earnings from continuing operations as well as revenues surpassed the Zacks Consensus Estimate. Funded orders in the reported quarter reflected a 1% year-over-year rise, while funded backlog dropped 0.5%.

L3 Technologies raised its 2017 outlook again. The company now expects earnings in the range of $8.50−$8.70 per share and revenues of $10,750−$10,950 million for 2017. However, the company reaffirmed its guidance for cash from operations as well as the resultant free cash flow (read more: L3 Technologies Tops Q1 Earnings, Raises '17 View).

6. Harris Corporation’s third-quarter fiscal 2017 adjusted earnings as well as revenues beat the Zacks Consensus Estimate. Both earnings and revenues declined on a year-over-year basis.

In terms of outlook, the company revised its fiscal 2017 guidance. It now expects adjusted earnings per share for fiscal 2017 in the band of $5.50 to $5.55 and revenues to drop 1% (read more: Harris Beats on Q3 Earnings & Sales, View Adjusted).

7. United Technologies’ first-quarter 2017 adjusted earnings as well as revenues exceeded the Zacks Consensus Estimate. Organic revenue growth boosted the quarterly results, on account of improved performance delivered by all its segments.

Coming to outlook, the company reaffirmed its guidance for 2017. The company still expects adjusted earnings in the range of $6.30–$6.60 per share on revenues of $57.5–$59 billion (read more: United Technologies Q1 Earnings Beat, Reaffirms View).

8. Lockheed Martin’s Aeronautics business unit secured a contract worth $1.38 billion from the U.S. Navy for providing long-lead time materials, parts and components in relation to low-rate initial production of 130 F-35 Lightning II aircraft of the 12th lot. Work under this deal is scheduled to be over by Dec 2018.

Last Week’s Performance

The defense biggies posted mixed numbers over the past five trading sessions. While Boeing and Raytheon’s shares rallied, a few others saw a decline in share price.

Over the past six months, however, majority of the industry majors delivered a stellar performance, except Northrop Grumman and Textron. Notably, Boeing gained the maximum at 20.52%, followed by Rockwell Collins.

The following table shows the price movement of major defense players over the past five trading days and the last six months.

CompanyLast WeekLast 6 Months
LMT-0.56%1.00%
BA0.09%20.52%
GD-0.44%8.77%
RTN0.40%5.24%
NOC-1.16%-0.80%
COL-1.11%9.16%
TXT-1.81%-2.38%
LLL-3.19%6.27%

 

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