Aerospace & Defense Stocks' Q3 Earnings on Oct 26: LHX, NOC & TXT
The third-quarter 2023 reporting cycle has started on a solid note for aerospace and defense stocks, with both Lockheed Martin and RTX Corp. reporting better-than-expected earnings and sales. Some major industry players like L3Harris Technologies LHX, Northrop Grumman NOC and Textron TXT are set to report their results tomorrow.
Factors That Influenced Aerospace & Defense Stocks
Per a recent report by the International Air Transport Association, industry-wide global revenues per kilometer increased 28.4% year over year in August 2023. This is indicative of the steadily growing air passenger traffic across the world, which, in turn, is likely to significantly boost the third-quarter results of aerospace and defense stocks, particularly those engaged in commercial aviation.
Evidently, Boeing witnessed a solid year-over-year surge of 111% and 33% in commercial shipments of its widebody 787 and 777 jets, respectively, during the quarter to be reported. With BA being the nation’s largest jet maker, we expect the July-September quarter results of the remaining aerospace majors to reflect a similar improvement in delivery trends. Revenues generated from such solid deliveries might have boosted the overall top as well as bottom-line growth of the Aerospace sector, which houses all aerospace and defense stocks.
Stocks that are more focused on combat are also expected to have gained as a result of consistent government support. Notably, a steady order flow observed in the past couple of quarters, along with an improving delivery trend in recent times, buoyed by recovering economic trends, is likely to have bolstered the aerospace and defense stocks’ third-quarter revenues.
However, persistent headwinds like supply-chain disruption, inflationary pressure, rising jet fuel prices, as well as increasing policy rates by the Federal Reserve might have adversely impacted the industry’s bottom-line performance.
Q3 Projections
The Aerospace sector’s earnings are expected to have improved 54.1% from the prior-year quarter’s reported figure, on a revenue surge of 8%.
For more details on quarterly releases, you can go through the latest Earnings Preview.
Aerospace & Defense Stocks to Watch
Let's take a look at three defense companies that are scheduled to report third-quarter 2023 earnings on Oct 26 and find out how things might have shaped up prior to the announcements.
L3Harris Technologies’ third-quarter results are expected to reflect strong revenue performance across most of its business segments. Higher revenues from the Space Systems business are likely to have boosted the Space and Airborne Systems unit’s revenues. Improved electronic component availability, as well as positive synergies from the acquisition of Tactical Data Links, is expected to have boosted Communication Systems’ top-line performance.
However, operational challenges within the Intelligence, Surveillance and Reconnaissance (ISR) and Maritime businesses might have hurt the Integrated Mission Systems’ (IMS) third-quarter revenues. Inflation-induced higher input costs and inflated interest expenses caused by increased interest rates might have had an adverse impact on LHX’s bottom-line performance (read more: Will Higher Input Cost Hurt L3Harris in 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 (Strong Buy) stocks here.
LHX currently has an Earnings ESP of -0.17% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
L3Harris Technologies Inc Price and EPS Surprise
L3Harris Technologies Inc price-eps-surprise | L3Harris Technologies Inc Quote
Northrop Grumman’s third-quarter results are expected to reflect strong revenue performance across most of its business segments. Higher volumes from the Integrated Air and Missile Defense Battle Command System program and ammunition programs, along with a ramp-up on the Hypersonic Attack Cruise Missile and advanced fuze programs, are likely to have aided the Defense unit’s revenue performance.
The Space System business unit’s revenues are likely to have been positively impacted by the ramp-up of development programs in Launch & Strategic Missiles and higher volumes from the Next Generation Interceptor and Ground-based Midcourse Defense Weapon Systems programs. However, labor market tightness and supply-chain disruptions might have increased the company’s total cost, thereby dampening Northrop’s bottom line in the third quarter.
NOC currently has an Earnings ESP of +1.48% and a Zacks Rank #3 (read more: Will Segment Revenues Aid Northrop's Q3 Earnings?).
Northrop Grumman Corporation Price and EPS Surprise
Northrop Grumman Corporation price-eps-surprise | Northrop Grumman Corporation Quote
Textron’s third-quarter results are expected to reflect strong revenue performance across majority of its business segments. Solid demand for jets and turboprops, along with higher pricing, is likely to have benefited Textron Aviation’s revenue performance in the third quarter.
Higher volumes in Specialized Vehicles and Kautex are likely to have continued to aid this segment’s performance in the soon-to-be-reported quarter. A strong top line, along with a favorable pricing impact, is likely to have boosted the company’s bottom line in the quarter to be reported.
Textron currently has an Earnings ESP of -4.07% and a Zacks Rank #3 (read more: Will Segmental Sales Aid Textron's Earnings in Q3?).
Textron Inc. Price and EPS Surprise
Textron Inc. price-eps-surprise | Textron Inc. Quote
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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
Textron Inc. (TXT) : Free Stock Analysis Report
L3Harris Technologies Inc (LHX) : Free Stock Analysis Report
