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Defense Stock Roundup: Q4 Picture Impressive, BA, UTX, LLL, GD Earnings Top

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The Zacks Aerospace sector saw Q4 results from only 10% of the constituent stocks, as of Jan 25. While these companies reported earnings growth of 41.6% year over year, revenues declined 6.6% in the current reporting cycle.

These quarterly numbers caused the major indices of the Aerospace-Defense space to end in the green over the trailing five trading sessions. Notably, the S&P 500 Aerospace & Defense (Industry) and the Dow Jones U.S. Aerospace & Defense index gained 4% in the aforementioned time period.

Among the past week’s highlights, quarterly results from a number of Aerospace-Defense majors, namely, Textron Inc. (TXT - Free Report) , Lockheed Martin Corp. (LMT - Free Report) , The Boeing Company (BA - Free Report) , United Technologies, Corp. (UTX - Free Report) , L3 Technologies, Inc. , Harris Corp. and General Dynamics Corp. (GD - Free Report) remained a key area of investors’ focus.

Recap of Past Week’s Important Stories


1.    Textron reported fourth-quarter 2018 adjusted earnings from continuing operations of $1.15 per share, which surpassed the Zacks Consensus Estimate of 98 cents by 17.3%. Earnings were up 55.4% year over year on improved segment profit.

Total revenues came in at $3,750 million, which fell short of the Zacks Consensus Estimate of $3,921 million by 4.4%. Cash flow from operating activities amounted to $1,109 million at the end of 2018 compared with $963 million at the end of 2017.

At the end of the quarter, order backlog at the company’s Bell segment’s totaled $5.8 billion, up a mere $0.1 billion from the figure registered in the preceding quarter (read more: Textron's Q4 Earnings Beat, Revenues Miss Estimates).

2.    Lockheed Martin’s fourth-quarter 2018 earnings of $4.39 per share came in line with the Zacks Consensus Estimate. The company’s net sales amounted to $14.41 billion, outshining the Zacks Consensus Estimate of $13.82 billion by 4.3%.

Lockheed Martin ended 2018 (on Dec 31, 2018) with $130.5 billion in backlog, up 23.7% from $105.5 billion at the end of 2017. Its cash and cash equivalents totaled $0.77 billion as of Dec 31, 2018, compared with $2.86 billion at the end of 2017.

During 2018, the company repurchased 4.7 million shares for $1.5 billion compared with 7.1 million share buyback for $2 billion a year ago. In 2019, Lockheed Martin expects to deliver earnings per share in the $19.15-$19.45 band (read more: Lockheed Martin Q4 Earnings In Line, Sales Top Estimates).

3.    Boeing’s adjusted earnings of $5.48 per share for fourth-quarter 2018 surpassed the Zacks Consensus Estimate of $4.52 by 21.2%. Revenues amounted to $28.34 billion, which improved 14% year over year.

Reported backlog included $27 billion of net orders during the fourth quarter. Additionally, Boeing delivered 238 commercial planes, up 14% in the same time period.

It exited 2018 with cash and cash equivalents of $7.64 billion, and short-term and other investments of $0.93 billion. Boeing generated $15.32 billion of operating cash flow at the end of 2018, up 14.9% year over year (read more: Boeing Q4 Earnings Top on Higher Revenues Y/Y, Backlog Up).

4.    United Technologies’ fourth-quarter adjusted earnings came in at $1.95 per share, surpassing the Zacks Consensus Estimate of $1.51. Revenues totaled $18,044 million, up 15.1% year over year.

The company exited 2018 with cash and cash equivalents of $6,152 million compared with $8,985 million registered in the previous year. Moreover, United Technologies generated net cash of $6,322 million from operating activities, up from $5,631 million recorded a year ago.

Its adjusted earnings are anticipated to lie within the $7.70-$8.00 per share range in 2019 (read more: United Technologies' Q4 Earnings and Revenues Beat).

5.    L3 Technologies’ fourth-quarter 2018 adjusted earnings of $3.10 per share from continuing operations surpassed the Zacks Consensus Estimate of $2.66 by 16.5%. Meanwhile, total revenues came in at $2.77 billion, which outpaced the Zacks Consensus Estimate of $2.72 billion by 1.8%.

Funded orders in the fourth quarter totaled $2.95 billion, reflecting an 8% rise from the year-ago quarter number.

At the end of 2018, net cash flow from operating activities amounted to $1,042 million compared with the year-ago cash flow of $985 million. For 2019, L3 Technologies anticipates net sales of $10.75 billion (read more: L3 Technologies Q4 Earnings & Revenues Beat Estimates).

6.    Harris Corp.’s GAAP earnings from continuing operations increased to $1.88 per share in the second quarter of fiscal 2019 from $1.08 in the year-ago quarter. Quarterly revenues increased 9% year over year to $1,666 million.

In the first half of fiscal 2019, Harris generated $469 million of cash from operating activities compared with $373 million in the year-ago period. Also, the company returned $363 million to shareholders through dividends and share repurchases during the same time frame (read more: Harris Trumps Q2 Earnings & Revenue Estimates, Ups View).

7.    General Dynamics’ fourth-quarter earnings from continuing operations of $3.07 per share exceeded the Zacks Consensus Estimate of $2.98 by 3%. Revenues amounted to $10,378 million, which edged past the Zacks Consensus Estimate of $10,286 million by 0.9%.

The company recorded a total backlog of $67.9 billion, up 7.4% annually.

As of Dec 31, 2018, General Dynamics’ cash provided by operating activities were $3,148 million compared with $3,876 million in the year-ago period. Free cash flow from operations at the end of 2018 was $2.5 billion compared with $3.45 billion at 2017-end (read more: General Dynamics Beats on Q4 Earnings, Sales Up Y/Y).

Performance

Over the past five trading sessions, the defense biggies put up a solid show. L3 Technologies gained the most with 9% increase in share price, followed by Boeing.

However, the industry's performance over the last six months has been mixed. While shares of Boeing gained a solid 10.4%, General Dynamics lost 11.8%.

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

CompanyLast WeekLast 6 Months
LMT2.43%-8.88%
BA8.26%10.44%
GD0.01%-11.81%
RTN3.06%-4.10%
NOC4.06%-0.14%
TXT3.06%-14.23%
LLL8.95%2.44%


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