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Defense Stock Roundup: Korea Treaty a Drag, LMT, BA, NOC, RTN Q1 Earnings Top
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With 267 S&P 500 companies having already reported results, the Q1 earnings season has crossed the half-way mark. As of Apr 27, of these 267 index members which revealed their earnings numbers, 79.8% delivered an earnings beat, while 73.8% surpassed revenue estimates.
Coming to the Zacks Aerospace sector’s projections for Q1, earnings of this space is expected to improve 37.3% on 7.5% sales growth.
However, such impressive numbers failed to drive the defense stocks over the last five trading sessions. Following the historic agreement to end the Korean War last week, defense stocks performance were negatively impacted. Consequently, major indices of the Aerospace-Defense space — the S&P 500 Aerospace & Defense (Industry) index dropped 6.2%, while the Dow Jones U.S. Aerospace & Defense index slipped 5.9%.
Nevertheless, quarterly results from a number of Aerospace-Defense majors — Lockheed Martin Corp. (LMT - Free Report) , United Technologies, Corp. , General Dynamics Corp. (GD - Free Report) , Northrop Grumman Corp. (NOC - Free Report) , Raytheon Company , Rockwell Collins Inc. and The Boeing Company (BA - Free Report) — remained a key area of investors focus.
1. Lockheed Martin reported first-quarter 2018 earnings from continuing operations of $4.02 per share, which surpassed the Zacks Consensus Estimate of $3.35 by 20%. In the reported quarter, total revenues came in at $11.64 billion surpassing the Zacks Consensus Estimate of $11.30 billion by 2.9%.
Pentagon’s prime defense contractor, Lockheed Martin, ended the first quarter (on Mar 25, 2018) with $104.8 billion in backlog, down 0.7% from $105.5 billion at the end of first-quarter 2017.
Cash from operations at the end of the first quarter was $0.6 billion compared with $1.7 billion at the end of the year-ago quarter. The company currently expects to generate revenues in the range of $50.4-$51.9 billion compared with the prior guidance of $50.0-$51.5 billion (read more: Lockheed Beats on Q1 Earnings, Raises '18 Guidance).
2. United Technologies reported adjusted earnings of $1.77 per share in first-quarter 2018, which trumped the Zacks Consensus Estimate of $1.51 and rose 19.6% year over year. Net sales in the reported quarter came in at $15,242 million, which exceeded the Zacks Consensus Estimate of $14,537 million.
For the first quarter, the company generated net cash of $453 million from its operating activities, down from $993 million recorded in the year-ago quarter.
3.General Dynamics reported first-quarter 2018 earnings from continuing operations of $2.65 per share, beating the Zacks Consensus Estimate of $2.47 by 7.3%. In the quarter, General Dynamics’ total revenues of $7,535 million missed the Zacks Consensus Estimate of $7,543 million by 0.1%.
As of Apr 1, 2018, General Dynamics’ cash and cash equivalents were $4,332 million, compared with $2,983 million as of Dec 31, 2017.
The company recorded a total backlog of $62.1 billion. Including the value in unfunded indefinite delivery, indefinite quantity contracts and unexercised options, at the end of first-quarter 2018 were $87.6 billion (read more: General Dynamics Tops on Q1 Earnings, Revenues Lag).
4.Northrop Grumman reported first-quarter 2018 earnings of $4.21 per share, beating the Zacks Consensus Estimate of $3.63 by 16%. The company reported total revenues of $6.74 billion, beating the Zacks Consensus Estimate of $6.58 billion by 2.3%.
Net cash used in operating activities at the end of Mar 31, 2018 was $0.24 billion compared with the year-ago figure of $0.44 billion.
5.Raytheon reported first-quarter 2018 earnings from continuing operations of $2.20 per share, beating the Zacks Consensus Estimate of $2.10 by 4.8%. The company’s first-quarter revenues of $6,267 million surpassed the Zacks Consensus Estimate of $6,173.2 million by 1.5%.
Raytheon’s bookings in the first quarter were $6,311 million compared with $5,688 million in the year-ago quarter, reflecting a rise of 11%. Operating cash inflow from continuing operations was $283 million at the end of first quarter compared with cash outflow of $41 million in the year-ago quarter.
6. Rockwell Collins’ second-quarter fiscal 2018 adjusted earnings per share of $1.81 beat the Zacks Consensus Estimate of $1.53 by 3.4%. The company’s total sales were $2,180 million, which beat the Zacks Consensus Estimate of $2,141 million by 1.8%.
Rockwell Collins’ total research and development investment (including increase in pre-production engineering costs) was $346 million, up 35.7%.
Cash used for operating activities at the end of the quarter was $77 million, compared with cash provided by operating activities of $1 million in the prior-year quarter (read more: Rockwell Collins Beats on Q2 Earnings, Sales Up Y/Y).
7.Boeing reported adjusted earnings of $3.64 per share for first-quarter 2018, beating the Zacks Consensus Estimate of $2.59 by 40.5%. The company's first-quarter revenues amounted to $23.38 billion in the quarter, beating the Zacks Consensus Estimate of $22.32 billion by 4.8%.
Backlog at the end of first-quarter was up to $486.2 billion from $474.8 billion at the end of 2017.
The company currently expects adjusted or core earnings per share in the range of $14.30-$4.50, up from prior guidance range of $13.80-$14.00 (read more: Boeing Beats on Earnings in Q1, Hikes '18 EPS View).
Performance
Over the last five trading sessions, the defense biggies put up a dismal show, except Boeing. Northrop Grumman lost the most with its share price having declined 9.6% in this period.
Over the last six months, the entire industry has put up a stellar performance. Keeping up with its usual trend, Boeing once again gained the most, with its shares surging 29%, followed by Textron.
The following table shows the price movement of the major defense players over the past five trading days and during the last six months.
Company
Last Week
Last 6 Months
LMT
-4.55%
4.11%
BA
1.59%
29.04%
GD
-9.22%
1.44%
RTN
-6.34%
0.45%
NOC
-9.56%
2.14%
COL
-0.37%
0.49%
TXT
-3.33%
4.23%
LLL
-5.50%
1.79%
What’s Next in this Space?
Harris Corp. is set to release third-quarter fiscal 2018 results on May 2, while on the same day Spirit AeroSystems will announce first-quarter 2018 numbers.
Huntington Ingalls is scheduled to release first-quarter 2018 results on May 3.
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Defense Stock Roundup: Korea Treaty a Drag, LMT, BA, NOC, RTN Q1 Earnings Top
With 267 S&P 500 companies having already reported results, the Q1 earnings season has crossed the half-way mark. As of Apr 27, of these 267 index members which revealed their earnings numbers, 79.8% delivered an earnings beat, while 73.8% surpassed revenue estimates.
Coming to the Zacks Aerospace sector’s projections for Q1, earnings of this space is expected to improve 37.3% on 7.5% sales growth.
However, such impressive numbers failed to drive the defense stocks over the last five trading sessions. Following the historic agreement to end the Korean War last week, defense stocks performance were negatively impacted. Consequently, major indices of the Aerospace-Defense space — the S&P 500 Aerospace & Defense (Industry) index dropped 6.2%, while the Dow Jones U.S. Aerospace & Defense index slipped 5.9%.
Nevertheless, quarterly results from a number of Aerospace-Defense majors — Lockheed Martin Corp. (LMT - Free Report) , United Technologies, Corp. , General Dynamics Corp. (GD - Free Report) , Northrop Grumman Corp. (NOC - Free Report) , Raytheon Company , Rockwell Collins Inc. and The Boeing Company (BA - Free Report) — remained a key area of investors focus.
(Read Defense Stock Roundup for Apr 23, 2018 here)
Recap of Last Week’s Key Stories
1. Lockheed Martin reported first-quarter 2018 earnings from continuing operations of $4.02 per share, which surpassed the Zacks Consensus Estimate of $3.35 by 20%. In the reported quarter, total revenues came in at $11.64 billion surpassing the Zacks Consensus Estimate of $11.30 billion by 2.9%.
Pentagon’s prime defense contractor, Lockheed Martin, ended the first quarter (on Mar 25, 2018) with $104.8 billion in backlog, down 0.7% from $105.5 billion at the end of first-quarter 2017.
Cash from operations at the end of the first quarter was $0.6 billion compared with $1.7 billion at the end of the year-ago quarter. The company currently expects to generate revenues in the range of $50.4-$51.9 billion compared with the prior guidance of $50.0-$51.5 billion (read more: Lockheed Beats on Q1 Earnings, Raises '18 Guidance).
2. United Technologies reported adjusted earnings of $1.77 per share in first-quarter 2018, which trumped the Zacks Consensus Estimate of $1.51 and rose 19.6% year over year. Net sales in the reported quarter came in at $15,242 million, which exceeded the Zacks Consensus Estimate of $14,537 million.
For the first quarter, the company generated net cash of $453 million from its operating activities, down from $993 million recorded in the year-ago quarter.
Buoyed by the impressive performance, the company raised its earnings and sales guidance for 2018 (read more: United Technologies Lifts '18 View on Solid Q1 Earnings).
3.General Dynamics reported first-quarter 2018 earnings from continuing operations of $2.65 per share, beating the Zacks Consensus Estimate of $2.47 by 7.3%. In the quarter, General Dynamics’ total revenues of $7,535 million missed the Zacks Consensus Estimate of $7,543 million by 0.1%.
As of Apr 1, 2018, General Dynamics’ cash and cash equivalents were $4,332 million, compared with $2,983 million as of Dec 31, 2017.
The company recorded a total backlog of $62.1 billion. Including the value in unfunded indefinite delivery, indefinite quantity contracts and unexercised options, at the end of first-quarter 2018 were $87.6 billion (read more: General Dynamics Tops on Q1 Earnings, Revenues Lag).
4.Northrop Grumman reported first-quarter 2018 earnings of $4.21 per share, beating the Zacks Consensus Estimate of $3.63 by 16%. The company reported total revenues of $6.74 billion, beating the Zacks Consensus Estimate of $6.58 billion by 2.3%.
Net cash used in operating activities at the end of Mar 31, 2018 was $0.24 billion compared with the year-ago figure of $0.44 billion.
The 2018 earnings are now expected to be in the range of $15.40-$15.65 per share, up from $15.00-$15.25 per share (read more: Northrop Beats on Earnings in Q1, Hikes '18 EPS View).
5.Raytheon reported first-quarter 2018 earnings from continuing operations of $2.20 per share, beating the Zacks Consensus Estimate of $2.10 by 4.8%. The company’s first-quarter revenues of $6,267 million surpassed the Zacks Consensus Estimate of $6,173.2 million by 1.5%.
Raytheon’s bookings in the first quarter were $6,311 million compared with $5,688 million in the year-ago quarter, reflecting a rise of 11%. Operating cash inflow from continuing operations was $283 million at the end of first quarter compared with cash outflow of $41 million in the year-ago quarter.
Raytheon now expects to deliver earnings per share in the range of $9.70-$9.90 in 2018, up from prior range of $9.55-$9.75 (read more:Raytheon Beats on Q1 Earnings, Hikes '18 EPS View).
6. Rockwell Collins’ second-quarter fiscal 2018 adjusted earnings per share of $1.81 beat the Zacks Consensus Estimate of $1.53 by 3.4%. The company’s total sales were $2,180 million, which beat the Zacks Consensus Estimate of $2,141 million by 1.8%.
Rockwell Collins’ total research and development investment (including increase in pre-production engineering costs) was $346 million, up 35.7%.
Cash used for operating activities at the end of the quarter was $77 million, compared with cash provided by operating activities of $1 million in the prior-year quarter (read more: Rockwell Collins Beats on Q2 Earnings, Sales Up Y/Y).
7.Boeing reported adjusted earnings of $3.64 per share for first-quarter 2018, beating the Zacks Consensus Estimate of $2.59 by 40.5%. The company's first-quarter revenues amounted to $23.38 billion in the quarter, beating the Zacks Consensus Estimate of $22.32 billion by 4.8%.
Backlog at the end of first-quarter was up to $486.2 billion from $474.8 billion at the end of 2017.
The company currently expects adjusted or core earnings per share in the range of $14.30-$4.50, up from prior guidance range of $13.80-$14.00 (read more: Boeing Beats on Earnings in Q1, Hikes '18 EPS View).
Performance
Over the last five trading sessions, the defense biggies put up a dismal show, except Boeing. Northrop Grumman lost the most with its share price having declined 9.6% in this period.
Over the last six months, the entire industry has put up a stellar performance. Keeping up with its usual trend, Boeing once again gained the most, with its shares surging 29%, followed by Textron.
The following table shows the price movement of the major defense players over the past five trading days and during the last six months.
What’s Next in this Space?
Harris Corp. is set to release third-quarter fiscal 2018 results on May 2, while on the same day Spirit AeroSystems will announce first-quarter 2018 numbers.
Huntington Ingalls is scheduled to release first-quarter 2018 results on May 3.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>