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BA or LMT: Which Aerospace/Defense Stock to Invest In?

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U.S. aerospace and defense is one of the nation’s key industries, given the increasing demand for defense equipment and commercial jets. The industry benefits from the volatile and uncertain geopolitical global backdrop, characterized by terrorist threats, civil wars and border disputes.

Shares of Aerospace Sector have returned 35.56% compared with the S&P 500 index’s return of 12.94%.

As of now, 95% of S&P 500 companies have already reported first-quarter 2018 results. In the quarter under review, the sector registered 7.8% earnings growth on the back of 37.8% revenue growth. The upside can be attributed to increasing defense budget allocations in the United States. A majority of the demand came from the nation and its allies like Europe. The recent trend of developing nations like India, which is increasing defense spend, has enhanced the stock's prospects.

In this article, we do a comparative analysis on two prominent Aerospace – Defense stocks —The Boeing Company BAand Lockheed Martin Corporation LMT— to find out which one is a profitable investment option.

Earnings & Surprise Trend

Boeing reported adjusted earnings of $3.64 per share in first-quarter 2018, beating the Zacks Consensus Estimate of $2.59 by 40.5%.

Lockheed Martin reported first-quarter 2018 earnings from continuing operations of $4.02 per share, which surpassed the Zacks Consensus Estimate of $3.35 by 20%.

Boeing has surpassed the Zacks Consensus Estimate in all the four trailing quarters with an average positive earnings surprise of 29.51%. Lockheed Martin has surpassed the Zacks Consensus Estimate in three out of four trailing quarters with an average positive surprise of 7.45%.


Boeing expects adjusted earnings per share in the range of $14.30-$4.50, up from previous guidance of $13.80-$14.00. The company continues to expect 2018 revenues in the range of $96-$98 billion.

For 2018, Commercial Airplanes delivery expectations are reiterated in the band of 810-815 with revenues still projected in the range of $59.5-$60.5 billion. Air traffic has increased manifold in the past few years in emerging markets like Asia with, countries like India and Japan strengthening their business realm. This has expanded demand for commercial fleet of jet-makers like Boeing. 

The company projects 2018 defense revenues in the $21.5-$22.5 billion range.  Company’s 2018 R&D is still forecast to be approximately $3.7 billion

Lockheed Martin expects to generate revenues in the range of $50.4-$51.9 billion compared with the previous range of $50.0-$51.5 billion.

The company expects 2018 GAAP earnings per share to be in the band of $15.80-$16.10, up from the earlier guidance of $15.20-$15.50.

Estimates Movement

In the last 30 days, the Zacks Consensus Estimate for Boeing’s earnings in 2018 and 2019 moved up 3.8% and 2.4%, respectively.

The Zacks Consensus Estimate for earnings in 2018 and 2019 moved up 2% and 0.7%, respectively, for Lockheed Martin.

Zacks Rank

Boeing carries a Zacks Rank #2 (Buy). The company has a market capitalization of around $209.27 billion.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lockheed Martin carries a Zacks Rank #3 (Hold). It has a market capitalization of $92.89 billion.

Price Movement

Shares of Boeing have returned 96.6% compared with the industry’s return of 43.27%. Shares of Lockheed Martin have returned 17.9%.


How Aerospace – DefenseAre Shaping Up for Q2

Increasing terrorist attacks across the globe have spurred nations to make heavy investments in their aerospace and defense. The U.S. aerospace and defense industry benefits from volatile and uncertain geopolitical global backdrop. Meanwhile, increased routes for travelers and trade activity are fueling air traffic growth, boosting commercial aerospace stocks.

Aerospace sector is expected to register earnings growth of 17.6% in second-quarter 2018 on the back of revenue growth of 4.2%. (For more details read our weekly Zacks Earnings Trends report)

The Verdict

Although Lockheed Martin beat the Zacks Consensus Estimate, Boeing surpassed the mark by a higher percentage. Boeing’s earnings surprise history surpasses that of Lockheed Martin.

Boeing holds a better Zacks Rank and witnessed higher percentage of estimates movement for 2018 and 2019 in the last 30 days compared with Lockheed Martin.

Though the companies are high-quality of Aerospace/Defense stocks, at present our verdict tilts toward Boeing.

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