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Defense Stock Q1 Earnings Reports Due on Apr 29: BA, GD, NOC

Zacks Equity Research

A number of major defense contractors are expected to release their financial numbers this week. Notably, Hexcel Corporation HXL started Q1 earnings for the defense space on Apr 20 on a mixed note. The company missed estimates for earnings but surpassed the same for revenues.

Defense stocks were on a growth trajectory for quite some time. However, the COVID-19-led crisis dealt a major blow to the operations of defense majors in the first quarter. A handful of defense manufacturers have either shut down production procedure or are operating with fewer workforces.

Moreover, deliveries of finished products were hampered with travel restrictions and social distancing in place.

Considering these, we remain a bit skeptical about the broader Aerospace sector, which constitutes defense stocks. Commercial aerospace players suffered in the first quarter, as air travel demand nosedived, thereby dragging down projections for the ongoing earnings season.

Q1 Projections

Aerospace sector Q1 earnings are expected to decline 43.5% year over year while revenues are projected to show 1.1% drop.  

For more details on quarterly releases, you can go through the latest Earnings Preview.

Defense Stocks to Watch

Let's take a look at some defense companies that are scheduled to report first-quarter 2020 earnings on Apr 29 and find out how things have shaped up prior to the announcements.

The Boeing Company’s BA first-quarter deliveries reflected a massive 66.4% year-over-year plunge in commercial shipments. Its defense deliveries also slumped 35% in the soon-to-be-reported quarter. All the major business segments of Boeing are likely to have performed dismally.

Particularly, 737 Max grounding and the subsequent halt in production of this program are likely to have taken a toll on its Q1 performance.(Read more: Will Global Services Unit Hurt Boeing's Q1 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.

Boeing has an Earnings ESP of -10.08% and a Zacks Rank #3, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter .

The Boeing Company Price and EPS Surprise

The Boeing Company Price and EPS Surprise

The Boeing Company price-eps-surprise | The Boeing Company Quote

Increased G500 and G600 aircraft deliveries are expected to have boosted General Dynamics Corp.’s GD Aerospace segment’s revenues in the to-be-reported quarter. Solid revenue growth in the majority of the company’s business segments is likely to have boosted the overall top line in the to-be-reported quarter. (Read more: Will Aerospace Unit Drive General Dynamics' Q1 Earnings?)

Reduction in per-unit manufacturing costs for the G500 and G600 aircraft is expected to have boosted its bottom line.

General Dynamics has an Earnings ESP of -3.83% and a Zacks Rank #4 (Sell).

General Dynamics Corporation Price and EPS Surprise

General Dynamics Corporation Price and EPS Surprise

General Dynamics Corporation price-eps-surprise | General Dynamics Corporation Quote

Increased production of F-35 jets is expected to have boosted Northrop Grumman Corp.’s NOC Aerospace Systems’ top line. Moreover, stable revenues from legacy technology services businesses are expected to get reflected in the upcoming result, backed by the boom in the defense and intelligence market.

During the first quarter, the company won a handful of multi-million-dollar contracts. This is expected to get reflected in the company's backlog count.

Northrop Grumman has Earnings ESP of +1.85% and a Zacks Rank #3 (read more: Northrop Q1 Earnings to Benefit From Segmental Growth).

Northrop Grumman Corporation Price and EPS Surprise

Northrop Grumman Corporation Price and EPS Surprise

Northrop Grumman Corporation price-eps-surprise | Northrop Grumman Corporation Quote

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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
 
The Boeing Company (BA) : Free Stock Analysis Report
 
General Dynamics Corporation (GD) : Free Stock Analysis Report
 
Hexcel Corporation (HXL) : Free Stock Analysis Report
 
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