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Defense Stocks Q3 Earnings Roster for Oct 25: BA, GD & More

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The Q3 earnings season is in full swing with 87 S&P 500 members having reported their quarterly results as of Oct 20. So far, the results reflect a positive and reassuring view of corporate earnings, which will most likely get strengthened as we move in the thick of the reporting cycle.

Notably, 24.7% of the index’s total market cap have reported results. While annual earnings have improved 9.4%, revenues increased 7.3%. The beat ratio for the bottom line was 71.3%, while that for top line was 70.1%, as of Oct 20.

Coming to the Aerospace-Defense industry, we saw Textron Inc. (TXT) kick-starting the Q3 earnings season last week with better-than-expected quarterly numbers. Several other majors in this space are slated to report third-quarter results this week.

Notably, projections for the Aerospace sector (one of the 16 Zacks sector), which constitutes the Aerospace-Defense industry, hint at a mixed quarter, when compared to the overall Q3 forecast for the S&P 500 cohort. The sector’s earnings are likely to decline 12.9% on 5.3% higher revenues; while earnings for S&P 500 members are likely to rise 2.6% on 5% higher revenues. For more details on quarterly releases, you can go through our latest Earnings Preview.

Interestingly, defense stocks in the third quarter reached new-all-time highs multiple times, courtesy of the varied supportive defense policy initiatives adopted by President Trump. In particular, the favorable budgetary amendments made by the U.S. government, like the passing of the fiscal 2018 defense policy bill worth $700 million, have boosted growth prospects of defense stocks. A steady flow of contracts from Pentagon to ‘rebuild’ the U.S. Army also provided an impetus to the stocks. With Trump strongly opposing the budget sequestration imposed by his predecessor, defense stocks are surely to gain notable traction in coming days.

With more than 700 companies (180 S&P 500 members) slated to report their results this week, let’s find out where the following defense stocks stand before their release of quarterly numbers on Oct 25.

The Boeing Company’s (BA - Free Report) solid deliveries of commercial aircraft are expected to primarily drive the company’s growth in the third quarter. Notably, its commercial deliveries showed a 7.4% annual improvement. Also a solid inflow of contracts for varied defense product offerings from both Pentagon as well as foreign allies will boost its quarterly sales.

Evidently, the Zacks Consensus Estimate for the company’s third-quarter sales growth is pegged at $24.06 billion, reflecting year-over-year increase of 0.7%.

Moreover, thanks to the huge number of commercial orders that the company won, the Zacks Consensus Estimate has predicted higher operating numbers for the third quarter. Commercial Airplanes segment’s operating profit is now expected to be $1,756 million, up 10% year over year.

Meanwhile, our proven model does not conclusively show an earnings beat for Boeing this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, Boeing lacks the right combination. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Boeing presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. The company has an Earnings ESP of +0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.66 (read more: Will Commercial Deliveries Drive Boeing's Q3 Earnings?).

For General Dynamics Corporation (GD - Free Report) substantial inflow of military contracts from Pentagon is expected to drive its third quarter revenues. The Zacks Consensus Estimate for the company’s third quarter sales is $7.9 billion, reflecting 2.1% year-over-year growth.

In particular, the company won a number of contracts in relation to its submarines. Being one of the top-notch submarine contractors in the nation, such contracts are expected to bolster the company’s Marine Systems segment’s growth. Evidently, our consensus estimate for the Marine Systems’ sales stands at $2,068 million, up 0.2% annually.

However, Aerospace segment’s sales growth in the second half of the year might be dented owing to unfavorable margins improvement. Our consensus estimate for the segment is pegged at $2,039 million, reflecting a year-over-year decline of 9.2%.

Moreover, our proven model does not conclusively shows that General Dynamics is likely to beat earnings this quarter. This is because the company currently carries a Zacks Rank #3 and has an Earnings ESP of -0.01%.

Northrop Grumman Corporation’s (NOC - Free Report) Aerospace Systems segment that fetch almost half of its sales, is a primary contributor to its quarterly growth.Notably, increased demand as well as deliveries of manned aircraft mainly boosts this segment’s sales. In the third quarter, the company won a number of contracts from the Pentagon. Impressively, the Zacks Consensus Estimate for the Aerospace Systems segment stands at $2,928 million, reflecting annual growth of 12.9%.

Segment-wise, Mission Systems business unit has been benefiting from the cost-reduction initiatives. We expect the third-quarter results to reflect strong sales growth for this unit. Evidently, our consensus estimate for sales for Mission Systems unit is $1,156 million, reflecting annual growth of 1%.

On the flip side, increased unallocated corporate expenses and effective tax rate dented the company’s second-quarter earnings growth. Anticipating similar expenses to linger, our consensus estimate for Northrop Grumman’s earnings of $2.92 per share reflects 3.2% annual decline.

Moreover, our proven model does not conclusively shows that Northrop Grumman is likely to beat earnings this quarter. This is becausethe company currently carries a Zacks Rank #2 and has an Earnings ESP of -1.93%. Its Most Accurate estimate is pegged at $2.87, lower than the Zacks Consensus Estimate of $2.92 (read more: Will Aerospace Unit Drive Northrop's Q3 Earnings?).

FLIR Systems, Inc.’s diverse portfolio has been a major growth driver, helping it offset weaknesses associated with any one market. Key metrics like revenues, operating income, operating margin and adjusted EPS have benefited from its restructuring efforts that the company adopted to streamline business operations and optimize growth . We expect this trend to continue in the soon-to-be-reported quarter as well.

In addition, impressive traction of FLIR Systems’ products, featuring the Lepton thermal microcamera core, is anticipated to boost the top line significantly. Also strategic acquisitions are likely to boost the company’s inorganic growth. Previously completed acquisitions, including Armasight, DVTEL and Dynamics, are expected to boost the company’s top-line performance.

Our proven model shows that FLIR Systems is likely to beat earnings this quarter. This is because the company currently carries a Zacks Rank #3 and has an Earnings ESP of +2.08%. Its Most Accurate estimate is pegged at 49 cents, higher than the Zacks Consensus Estimate of 48 cents (read more: Can FLIR Systems Deliver Another Beat in Q3 Earnings?).

FLIR Systems, Inc. Price and EPS Surprise

FLIR Systems, Inc. Price and EPS Surprise | FLIR Systems, Inc. Quote

Stay tuned! Check later for our full write-up on earnings releases of these stocks.

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