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Defense Stock Q1 Earnings Roster for May 7: HII, RTX, KTOS

Aparajita Dutta

So far, a handful of prime defense contractors have released their Q1 results. While jet giants, Lockheed LMT and Boeing BA reported better-than-expected quarterly bottom-line performance, other defense primes like General Dynamics GD and Northrop Grumman NOC missed the mark.

Notably, defense stocks were on a growth trajectory for quite some time, thanks to the expansionary budgetary amendments adopted by the U.S. administration over the past couple of years and growing geo-political tensions worldwide. However, the COVID-19-led crisis dealt a major blow to the operations of defense majors in the first quarter. Some defense manufacturers have either shut down production 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. In particular, commercial aerospace players suffered the most in the first quarter, as air travel demand nosedived, thereby dragging down sector projections for the Q1 reporting cycle.

Q1 Projections

Aerospace sector Q1 earnings are expected to decline 41.7% year over year while revenues are projected to be 2% lower.  

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 May 7.

Huntington Ingalls Industries Inc. HII has a four-quarter average negative surprise of 5.19%. The company’s first-quarter results are likely to reflect increased volumes in aircraft carrier construction and aircraft carrier RCOH programs, and higher Navy nuclear support services. Moreover, the shipbuilder’s quarterly earnings are expected to have benefited from improved margin performance as it has been focused on reducing capital expenditures (read more: Is a Beat in Store for Huntington Ingalls 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.

Huntington Ingalls has an Earnings ESP of +1.79% and a Zacks Rank #3, which increases the chance of earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Huntington Ingalls Industries, Inc. Price and EPS Surprise

Huntington Ingalls Industries, Inc. Price and EPS Surprise

Huntington Ingalls Industries, Inc. price-eps-surprise | Huntington Ingalls Industries, Inc. Quote

Raytheon Technologies Corp.’s RTX first-quarter earnings estimate of $1.11 per share remained stable over the past seven days. The company’s first-quarter results are likely to reflect disappointing revenues and earnings when compared year over year. Costs related to the merger between Raytheon Company and United Technologies are expected to have weighed on earnings in the soon-to-be-reported.

Raytheon has an Earnings ESP of 0.00% and a Zacks Rank #5 (Strong Sell) (read more: What Awaits Raytheon Technologies in Q1 Earnings?).

Raytheon Technologies Corporation Price

Raytheon Technologies Corporation Price

Raytheon Technologies Corporation price | Raytheon Technologies Corporation Quote

Kratos Defense & Security Solutions, Inc. KTOS delivered an average positive surprise of 81.17% in the trailing four quarters. The company’s first-quarter results are likely to reflect solid growth trends of its Unmanned Systems and Satellite Communications businesses. However, the impact of the USN app Navy training program and protest situation might have affected its margin performance.

Kratos Defense has an Earnings ESP of 0.00% and a Zacks Rank #3 (read more: Kratos Defense to Post Q1 Earnings: What's in Store?).

Kratos Defense & Security Solutions, Inc. Price and EPS Surprise

Kratos Defense & Security Solutions, Inc. Price and EPS Surprise

Kratos Defense & Security Solutions, Inc. price-eps-surprise | Kratos Defense & Security Solutions, Inc. 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
 
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Huntington Ingalls Industries Inc (HII) : Free Stock Analysis Report
 
Kratos Defense Security Solutions Inc (KTOS) : Free Stock Analysis Report
 
Raytheon Technologies Corporation (RTX) : Free Stock Analysis Report
 
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