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Defense Stock Roundup: KTOS, SPR, HII Beat on Q3 Earnings

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We witnessed Q3 results from a handful of defense majors in the past five trading sessions. While better-than-expected operational performance of the majority of these stocks boosted the defense space, the boom in the broader market also led to growth. Notably, the Wall Street reached record highs after the first successful data from a late-stage COVID-19 vaccine trial bolstered hopes of economic recovery.

Consequently, major indices of the defense space ended in the green zone over the trailing five trading sessions. Evidently, the S&P 500 Aerospace & Defense (Industry) index gained 11.1%, while the Dow Jones U.S. Aerospace & Defense index rose 9.3% in the aforementioned period.

In the past week, Kratos Defense & Security Solutions (KTOS - Free Report) , Spirit AeroSystems Holdings (SPR - Free Report) , Huntington Ingalls Industries (HII - Free Report) and Leidos Holdings (LDOS - Free Report) reported their Q3 results.

Recap of Past Week’s Important Stories

1.    Kratos Defense’s third-quarter 2020 earnings of 14 cents per share surpassed the Zacks Consensus Estimate by 55.6% and also improved 7.7% year over year. Its revenues of $202 million came in line with the Zacks Consensus Estimate but increased 9.7% from the year-ago quarter.

The company reported third-quarter 2020 bookings of $356.7 million and a book-to-bill ratio of 1.8 to 1.0, with a backlog of $873.1 million as of Sep 27, 2020.

At the end of the first nine months of 2020, cash generated from operating activities was $19.1 million compared with $30.2 million in the first nine months of 2019. For 2020, the company affirmed its revenue guidance of $740-$780 million (read more: Kratos' Q3 Earnings Top Estimates, Revenues Up Y/Y).

2.    Spirit AeroSystems reported third-quarter 2020 adjusted loss of $1.34 per share, narrower than the Zacks Consensus Estimates of a loss of $1.65. Its revenues of $806 million beat the Zacks Consensus Estimate by 4.5% but plunged a massive 58% from the year-ago period.

Its backlog at the end of third-quarter 2020 was $40 billion, lower than $41 billion in the prior quarter.

Net cash used in operating activities came in at $612.8 million at the end of third-quarter 2020 against net cash inflow of $718.6 million at the end of third-quarter 2019 (read more: Spirit AeroSystems Q3 Earnings Top, Revenues Slump Y/Y).

3.    Huntington Ingalls’ third-quarter 2020 earnings of $5.45 per share surpassed the Zacks Consensus Estimate by 30.4% and improved 45.7% year over year. Its revenues came in at $2,314 million, exceeding the Zacks Consensus Estimate by 3.9%. The top line also improved 4.3% from the year-ago quarter.

Huntington Ingalls received orders worth $1.6 billion during the third quarter. As a result, the company’s total backlog reached $45.3 billion as of Sep 30, 2020..

Cash from operating activities at the end of third-quarter 2020 grossed $491 million, up from the previous year’s $330 million (read more: Huntington Ingalls Q3 Earnings Beat, Revenues Up Y/Y).

4.    Leidos Holdings’ third-quarter 2020 adjusted earnings of $1.47 per share beat the Zacks Consensus Estimate by 17.6% and grew 8.1% from the year-ago period. Its total revenues of $3,342 million exceeded the Zacks Consensus Estimate by 5.2%. and improved 7.9% year over year.

The company’s backlog at the end of the quarter was $31.7 billion, of which $6.8 billion was funded.

Net cash provided by operating activities in the first nine months of 2020 was $1,386 million compared with $823 million provided in the first nine months of 2019. Leidos Holdings revised its outlook for 2020 (read more: Leidos Holdings Q3 Earnings Beat, 2020 EPS View Raised).

Performance

Over the past five trading sessions, the defense biggies put up an impressive show. Boeing gained the most, with its share price surging 24.3%, followed by Textron (TXT - Free Report) .

In the last six months, the industry's performance was mixed. This time also, Boeing gained the most, up 30%, while L3Harris lost 9.1%.

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
LMT3.24%-1.88%
BA24.27%18.21%
GD9.14%-3.95%
HII7.11%0.70%
NOC5.37%-3.90%
TXT15.29%-4.42%
LHX3.40%-9.06%

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