So far, two S&P 500 companies from the Aerospace sector have released their Q3 results in the current earnings cycle, namely Lockheed Martin and Raytheon Technologies.
Impressively. both of them came up with better-than-expected earnings figures. 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 Oct 27.
Factors That Influenced Aerospace & Defense Stocks
Growing global air travel demand, driven by a steady recovery in the domestic space as well as improving trends observed in international air travel, is expected to significantly boost the Q3 results of aerospace and defense stocks, particularly those engaged in commercial aviation. Evidently, Boeing witnessed a solid year-over-year surge of 31.8% in its commercial shipments during the third quarter. With Boeing being the largest jet maker in the nation, we expect the Q3 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.
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 improving delivery trends in recent times, buoyed by recovering economic trends are projected to have bolstered Q3 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 Q3 bottom line of the industry.
Aerospace sector Q3 earnings are expected to slip 0.7% from the prior-year quarter’s reported figure, while revenues are projected to improve 8.2%.
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Aerospace & Defense Stocks to Watch
Let's take a look at three defense companies that are scheduled to report third-quarter 2022 earnings on Oct 27 and find out how things have shaped up prior to the announcements.
Textron’s Q3 results are likely to reflect mixed segmental performance. Notably, a steady air travel trend has been boosting the commercial aviation market, which in turn must have bolstered TXT’s aviation segment’s Q3 performance, while lower revenues related to lower H-1 production are expected to have hurt the performance of the Bell segment.
The addition of PIPISTREL, post its acquisition this April, must have also boosted Q3 revenue growth (read more: Will Mixed Segment Performance Aid Textron's Q3 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 -3.90% 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.
Textron Inc. Price and EPS Surprise
Textron Inc. price-eps-surprise | Textron Inc. Quote
Northrop’s Q3 results are likely to reflect strong revenue performance across most of its segments. While an increase in restricted sales in the Networked Information Solutions business area and higher volumes on the Ground/Air Task-Oriented Radar (G/ATOR) and Surface Electronic Warfare Improvement Program must have boosted Mission Systems’ Q3 performance, lower volumes from manned aircraft and autonomous systems might have unfavorably impacted the revenue performance of the Aeronautics segment.
Meanwhile, higher sales from the Launch & Strategic Missiles and Space business areas are expected to bolster the Space Systems unit’s results.
Northrop has an Earnings ESP of +0.83% and a Zacks Rank #4 (read more: Will Segmental Sales Benefit Northrop's Q3 Earnings?).
Northrop Grumman Corporation Price and EPS Surprise
Northrop Grumman Corporation price-eps-surprise | Northrop Grumman Corporation Quote
L3Harris Technologies’ Q3 results are likely to reflect solid sales performance in the majority of its segments. While an increase in revenues from responsive satellite programs is likely to have boosted Q3 revenues from the Space and Airborne Systems segment, the positive impact of public safety may have contributed to the Communication Systems segment in the soon-to-be-reported quarter.
However, high inflation and supply-chain constraints may have partially dampened the bottom line in the soon-to-be-reported quarter.
L3Harris Technologies has an Earnings ESP of -1.42% and a Zacks Rank #4 (read more: Will Segmental Performance Aid L3Harris Q3 Earnings?)
L3Harris Technologies Inc Price and EPS Surprise
L3Harris Technologies Inc price-eps-surprise | L3Harris Technologies Inc Quote
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