So far, two S&P 500 companies from the Aerospace sector have released their quarterly results in current earnings cycle, namely Lockheed Martin and Raytheon Technologies. Impressively both of them came up with better-than-expected earnings figure. Another cohort of major aerospace & defense stocks like Textron Inc. TXT, Northrop Grumman Corp. NOC and L3Harris Technologies LHX are set to announce their earnings on Jul 28.
Factors that Influenced Aerospace & Defense Stocks
The continuous recovery in global air travel, both domestic and international, over the past few quarters is expected to boost the Q2 results of the aerospace and defense stocks, particularly those engaged in commercial aviation. Evidently, Boeing witnessed a solid year-over-year surge of 53.2% in its commercial shipments during the second quarter. With Boeing being the largest jet maker in the nation, we expect the Q2 results of the remaining aerospace majors to reflect a similar improvement in delivery trends. Such solid deliveries must have boosted the overall top-line growth of the Aerospace sector, which houses all aerospace and defense stocks.
On the other hand, stocks in this industry that are more focused on combat must have gained as a result of steady government support. Moreover, a steady order flow observed in the past couple of quarters, along with improved deliveries in recent times, buoyed by recovering economic trends are projected to have bolstered Q2 revenues of aerospace and defense stocks.
However, persistent headwinds like supply chain disruption along with some unfavorable project timing as the result of coronavirus might have an adverse impact on the overall Q2 results of some of the industry majors.
Aerospace sector Q2 earnings are expected to decline 7.9% from the prior-year quarter’s reported figure, while revenues are projected to inch up 0.4%.
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Aerospace & Defense Stocks to Watch
Let's take a look at three defense companies that are scheduled to report second-quarter 2022 earnings on Jul 28 and find out how things have shaped up prior to the announcements.
Textron’s Q2 results are likely to reflect mixed segmental performance. Notably, strong deliveries for Citation jets and commercial turboprops along with higher aftermarket volume are expected to have boosted its aviation segment’s results, while lower military volumes might have hurt Bell unit’s top-line performance.
Higher commercial deliveries, favorable pricing and increased operating leverage must have bolstered its bottom line in the soon-to-be-reported quarter (read more: Will Mixed Segment Performance Aid Textron's Q2 Earnings?).
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.
Textron has an Earnings ESP of -0.38% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Textron Inc. Price and EPS Surprise
Textron Inc. price-eps-surprise | Textron Inc. Quote
Northrop’s Q2 results are likely to reflect moderate growth in the majority of its segment sales. While lower volumes from manned aircraft and autonomous systems might have unfavorably contributed to the revenue performance of the Aeronautics segment, higher volumes from the international weapons program are expected to have favorably contributed to Defense Systems’ second-quarter revenues.
Meanwhile, Northrop’s second-quarter earnings might have been negatively impacted by lower net FAS/CAS pension, the performance of marketable securities and a poor top line in the soon-to-be-reported quarter.
Northrop has an Earnings ESP of 0.00% and a Zacks Rank #3 (read more: Will Soft Segmental Sales Hurt Northrop's Q2 Earnings?).
Northrop Grumman Corporation Price and EPS Surprise
Northrop Grumman Corporation price-eps-surprise | Northrop Grumman Corporation Quote
L3Harris Technologies’ Q2 results are likely to reflect mixed sales performance in its segments. Improved commercial air traffic and higher volumes from Electro Optical programs are projected to have boosted Integrated Mission Systems’ revenues, whereas supply chain constraints might have dampened the performance of the Communication Systems segment.
Factors like airborne program transitions, award timings and supply-chain constraints are going to impact the company’s quarterly performance.
L3Harris Technologies has an Earnings ESP of +0.95% and a Zacks Rank #3 (read more: Will Segmental Performance Hurt L3Harris Q2 Earnings?)
L3Harris Technologies Inc Price and EPS Surprise
L3Harris Technologies Inc price-eps-surprise | L3Harris Technologies Inc Quote
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