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Defense Stock Roundup: BA, LHX, GD, LHX, Beat on Q3 Earnings

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In the past five trading sessions, we witnessed results of some of the key defense players who delivered mixed operational performance. The U.S. stock market as a whole continued to reel under the record rise in COVID-19 cases and uncertainty revolving around the upcoming elections.

The S&P 500 Aerospace & Defense (Industry) index slipped 0.6%, while the Dow Jones U.S. Aerospace & Defense index dipped 1.7% in the trailing five trading sessions.

In the past week, The Boeing Company (BA - Free Report) , L3Harris Technologies (LHX - Free Report) , General Dynamics (GD - Free Report) , Textron (TXT - Free Report) , Raytheon Technologies (RTX - Free Report) and FLIR Systems reported their Q3 results.

Recap of Past Week’s Important Stories

1.    Boeing incurred adjusted loss of $1.39 per share for third-quarter 2020 narrower than the Zacks Consensus Estimate. However, the bottom line deteriorated from earnings reported in the year-ago quarter. Its revenues of $14.14 billion beat the Zacks Consensus Estimate by 2.4% but declined 29.2% from the year-ago quarter’s figure.

Backlog at the end of third-quarter 2020 dropped to $393.1 billion from $408.7 billion at the end of second-quarter 2020.

Boeing exited the third quarter with cash and cash equivalents of $10.56 billion and short-term and other investments of $16.55 billion. Its free cash outflow totaled $15.44 billion in third-quarter 2020 (read more: Boeing Q3 Earnings Beat Estimates, Revenues Decline Y/Y).

2.    L3Harris’ third-quarter 2020 adjusted earnings came in at $2.84 per share, which surpassed the Zacks Consensus Estimate by 4.4% and increased 10% year over year. Its revenues came in at $4,463 million, lagging the Zacks Consensus Estimate by 0.8%. However, revenues inched up 0.7% on a year-over-year basis.

As of Oct 2, 2020, L3Harris had $1,341 million in cash and cash equivalents compared with $824 million as of Jan 3, 2020.

L3Harris made some changes to its 2020 guidance. The company currently expects to generate organic revenues of 4% on a pro-forma basis and revenues of $18.4 billion (read more: L3Harris Technologies Beats on Q3 Earnings, Tweaks View).

3.    General Dynamics reported third-quarter 2020 earnings from continuing operations of $2.90 per share, which beat the Zacks Consensus Estimate by 1.8% but declined 7.6% from the prior-year quarter. Its revenues of $9,431 million missed the Zacks Consensus Estimate by 1.7% and also declined 3.4% year over year.

General Dynamics’ total backlog at the end of third-quarter 2020 was $81.5 billion, up 21% from the year-ago quarter.

Company-wide operating margin contracted 100 basis points (bps) to 11.5% from the year-ago quarter’s 12.5%. In the first nine months of 2020, the company’s cash provided by operating activities was $1,296 million, compared with $587 million in the year-ago period (read more: General Dynamics' Q3 Earnings Beat, Revenues Down Y/Y).

4.    Textron’s third-quarter 2020 adjusted earnings of 53 cents per share exceeded the Zacks Consensus Estimate by 51.4%. Its revenues of $2,735 million missed the Zacks Consensus Estimate by 3.1% and also decreased 16.1% year over year.

As of Oct 3, 2020, cash and cash equivalents totaled $2,518 million compared with $1,181 million as of Jan 4, 2020.

Cash flow from operating activities amounted to $220 million at the end of the third quarter compared with $205 million at the end of the prior-year period (read more: Textron Q3 Earnings Beat Estimates, Revenues Fall Y/Y).

5.    Raytheon Technologies’ third-quarter 2020 adjusted earnings per share (EPS) of 58 cents outpaced the Zacks Consensus Estimate by 20.8% but declined 54.3% from the year-ago quarter’s tally. The company’s GAAP sales came in at $14,747 million, which missed the Zacks Consensus Estimate by 2.5%.

Raytheon Technologies ended Sep 30, 2020 with cash and cash equivalents of $10,001 million, up from $4,937 million as of Dec 31, 2019.

Its free cash flow was $1,792 million compared with $3,374 million at the end of third-quarter 2019 (read more: Raytheon Technologies Q3 Earnings Beat, Sales Miss).

6.    FLIR Systems’ third-quarter 2020 adjusted earnings of 64 cents per share surpassed the Zacks Consensus Estimate by 14.3% and increased 10.3% from the prior-year quarter. Its revenues declined 1% year over year and also missed the Zacks Consensus Estimate by 1%.

Total backlog at the end of the third quarter increased 10.9% to $898.7 million on a year-over-year basis.

Cash flow from operating activities for the nine months ended Sep 30, 2020 amounted to $196.2 million compared with $276.8 million as of Sep 30, 2019. FLIR Systems updated its financial guidance for 2020 (read more: FLIR Systems Q3 Earnings Beat, Revenues Down Y/Y).

Performance

Over the past five trading sessions, the defense biggies put up a poor show. Boeing lost the most, with its share price declining 13.7%, followed by Raytheon Technologies.

In the last six months, the industry's performance was mixed. Textron gained the most this time, up 30%, while Raytheon lost 13.1%.

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

CompanyPast WeekLast 6 Months
LMT-2.21%-8.69%
BA-13.72%11.19%
GD-6.66%2.75%
RTX-13.19%-13.04%
NOC-6.03%-11.66%
TXT1.73%29.94%
LHX-6.22%-14.96%


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