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Defense Stock Earnings Roster for Aug 4: TDG, KTOS & More

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So far, we have witnessed mixed reports this earnings season from prime defense contractors. While General Dynamics (GD - Free Report) , Raytheon Technologies (RTX - Free Report) and Northrop Grumman reported better-than-expected quarterly bottom line, jet giant, Boeing (BA - Free Report) missed the Zacks Consensus Estimate.

Notably, the defense space has been witnessing a modest downside since the novel coronavirus started to spread worldwide. Coming to the companies’ performance in the second quarter, commercial aerospace players suffered the most as air travel demand remained substantially low, thereby dragging down projections for the ongoing earnings season.

Moreover, to maintain proper social distancing, a handful of defense manufacturers either shut down their production units for a few days or reduced production rate by employing fewer workforce.

No doubt this caused production inefficiencies, thereby dealing a blow to the industry’s margins. Deliveries of finished products were hampered owing to stringent travel restrictions, which are likely to have dragged down revenues and pushed up costs of storage.

Considering these, we remain a bit skeptical about the broader Aerospace sector, which constitutes defense stocks.

Q2 Projections

Aerospace sector Q2 earnings are expected to decline 69.5% year over year while revenues are projected to be 7.1% lower.  

For more details on quarterly releases, you can go through the latest Earnings Preview.

Defense Stocks to Watch

Let's take a look at some defense companies that are scheduled to report earnings on Aug 4.

TransDigm Group Inc. (TDG - Free Report) delivered a four-quarter average earnings surprise of 16.69%. The company’s third-quarter fiscal 2020 results are likely to reflect weak commercial aftermarket sales owing to decline in revenue passenger miles, courtesy of the COVID-19 impact.

Moreover, the prolonged grounding of Boeing’s (BA - Free Report) 737 MAX and subsequent production rate cuts might have had an impact on the company’s performance in  the to-be-reported quarter(read more: TransDigm Group to Report Q3 Earnings: What's in Store?).

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

TransDigm Group has an Earnings ESP of -6.88% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Kratos Defense & Security Solutions (KTOS - Free Report) has a four-quarter average earnings surprise of 18.67%. The company has been witnessing delays of certain supplier deliveries and reduction in demand from certain of its commercial aero and power customers. This in turn may have marred its growth in the second quarter of 2020.

Also certain program delays in recent times are expected to have pushed up its expenses and thereby impacted its bottom line.

The company currently has an Earnings ESP of 0.00% and a Zacks Rank #4 (read more:Kratos Defense to Post Q2 Earnings: What's in Store?)

Spirit AeroSystems Holdings, Inc. (SPR - Free Report) has a four-quarter average negative earnings surprise of 4.60%. Its shipset deliveries may have tumbled in the second quarter, as both its major customers, Boeing (BA - Free Report) and Airbus (EADSY), have been struggling financially due to the drastic impacts of the coronavirus pandemic.

The company projects incremental forward loss of approximately $70-$90 million from the 787 program in the second quarter. This in turn might have weighed on its quarterly earnings.

Currently, the company boasts an Earnings ESP of -13.43.and a Zacks Rank #4 (read more: What's in Store for Spirit AeroSystems' Q2 Earnings?).

Leidos Holdings, Inc. (LDOS - Free Report) has a four-quarter average earnings surprise of 6.65%. The defense sector has been largely resilient to coronavirus impact. With Leidos Holdings generating almost half of its revenues from the Defense Solutions segment, earlier won order growth must have boosted its second-quarter revenues.

To tackle COVID-19 crisis, Leidos Holdings has hired aggressively for enabling teleworking capabilities through hardware software and cloud-based service deployments. This might have pushed up its quarterly expenses.

The company currently hasan Earnings ESP of +0.11% and a Zacks Rank #3 (read more: What's in Store for Leidos Holdings in Q2 Earnings?).

Leidos Holdings, Inc. Price and EPS Surprise

Leidos Holdings, Inc. Price and EPS Surprise

Leidos Holdings, Inc. price-eps-surprise | Leidos Holdings, Inc. Quote

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